As the State of the Union address and subsequent pronouncements have made clear, American politics is in the firm grip of fiscal illusion.
Counting such bond holdings as net wealth rather than as a transfer from others in the future is a fiscal illusion.
As important as the fiscal illusion associated with government debt is, a very strong argument can be made that it is an even bigger problem for the unfunded liabilities created by the Social Security and Medicare programs.
The fiscal illusion of unfunded liabilities is illustrated by Biden's attacks on Republicans for supposedly wanting to cut Social Security and Medicare, in search of more senior citizen votes in 2024, by claiming a sharp contrast with him, because "I will not cut a single Social Security or Medicare benefit." However, given those programs' massive unfunded liabilities, the status quo is not in fact a sustainable option, so doing nothing now about the programs means imposing an even larger hit on seniors beginning in the very near future.
An even clearer indicator of the fiscal illusion being manipulated in the unfunded liabilities discussion is the Democrat support for the Social Security 2100 Act, which, in the guise of protecting a "Sacred Trust," increases current benefits in the program.
Doing so in a system which we know will not be able to pay its accumulated bills is to raise its future liabilities, increasing its generational unfairness, but by portraying themselves as "Saving" Social Security, rather than as increasing more burdens on future Americans, they are doubling down on their manipulation of the fiscal illusion involved.
We should recognize that manipulating fiscal illusion, with even larger stakes, is also at work in the political treatment of entitlements programs.
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