the U.S. government is, indeed, bankrupt, insofar as it will be unable to pay its creditors, who, in this context, are current and future generations to whom it has explicitly or implicitly promised future net payments of various kinds.
Calling the U.S. bankrupt depends on calling future Social Security and Medicare recipients "creditors." But the government's extravagant promises can be taken away as well as given. The question is when and how. The government can wipe out its "bankruptcy" at the stroke of a pen by raising future retirement ages, although Kotlikoff probably would argue that for his tastes this does not shift enough of the burden onto the current wealthy elderly.
Kotlikoff proposes replacing Social Security going forward with mandatory personal accounts. He proposes replacing Medicare, Medicaid, and private health insurance with government vouchers that are based on expected personal health expenditures (if you have a chronic illness, you get a larger voucher). Finally, Kotlikoff proposes a tax reform not unlike Bleeding-heart Libertarianism.
The fundamental problem, which Kotlikoff expresses in somewhat different terms, is that there is no consumer protection agency for phony government marketing. If a private company tried something as unsound as Social Security or Medicare, it would be shut down and its officers put on trial. But the voting public is ignorant of government scams, and I see nothing that will change that. As my co-blogger points out, there is almost no incentive for the voting public to be anything but ignorant.