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The Purple Plans

Dear Fellow Economists and Concerned Citizens,

As you know, our country is at a critical juncture. Growth has slowed to a crawl. Fourteen million Americans are unemployed, and three million have stopped looking for work. We are saving nothing and investing next to nothing.

Last year's national saving rate was 0.1 percent, and our net domestic investment rate was 4.4 percent. Saving nothing means we have nothing to invest in our country. Those investing in our country are foreigners, which explains our huge current account deficit. It's easy to blame foreigners for our problems, but without their investment, our net domestic investment rate would also be 0.1 percent.

Most Americans have experienced no growth in their real take home pay in decades. Those who are doing well are doing better, with income and wealth growing more unequal over time. And our government is broke. Based on the Congressional Budget Office's latest projections, the fiscal gap separating the present value of projected non-interest spending plus the official debt and the present value of projected taxes totals $211 trillion.

This is the mountain of obligations we ignore while focusing on the $10.3 trillion "molehill" of official debt held by the public. Decades of Enron-style accounting has permitted both parties to keep the vast majority of the government's debts off the books.

Our fiscal gap is 14 times GDP -- a larger ratio than prevails in Greece or, it appears, any other developed country. Eliminating the fiscal gap without structural reform would require either an immediate and permanent 64 percent increase in all federal taxes or a 40 percent cut in all federal non-interest spending. Delaying such adjustments leaves an even bigger bill for our children.

We need fundamental structural reforms of our fiscal and financial institutions to kick start our economy and protect our children from an economic future we would not seek for ourselves. Our tax system is a disgrace. Our Social Security system is an inefficient and inequitable morass of incomprehensible rules. Moreover, Social Security is in worse fiscal shape than in 1983 when the Greenspan Commission "fixed" it. The costs of Medicare and Medicaid continue to explode, and the new Health Exchanges, while promising to do tremendous good for tens of millions of uninsured, could easily face explosive costs.

The 2,300-page Dodd-Frank bill retained our "trust me" banking system. As a consequence, it stands poised to re-detonate, whether triggered again by fraud or by a collapse of U.S. or European government bond markets. Finally, our energy policy continues to endanger our children and our globe and enrich our enemies.

Our future lies in one place and one place only -- in the well being of our children. Our sacred duty as adults is to protect their welfare. We have failed in that responsibility. Our politicians, in both parties, care, it seems, much more about the next election than the next generation.

The time has come to support policies, not people. We need solutions that are fair, bold, efficient, transparent, sustainable and generationally equitable. The Purple Plans reflect a non-partisan economist's solution to our problems. Each plan should appeal to both red Republicans and blue Democrats. Hence, the name "Purple Plans."

President Kennedy said, "Our problems are man-made, therefore they may be solved by man. No problem of human destiny is beyond human beings."

Were he with us today, he would not sit silent while Washington continues to do too little too late. I ask you to read the following simple reform plans at the websites listed below, to endorse them if you can, and to spread their addresses far and wide, particularly to the President, members of his administration, and members of Congress, .

Many thanks for considering this appeal.

Sincerely yours,

Laurence J. Kotlikoff

Professor of Economics, Boston University