In an Op Ed article last fall in the Wall Street Journal two former Congressmen, Chris Cox and Bill Archer, point out that the total US government debt, now over $16 trillion, is only a fraction of the total unfunded liabilities of the government, which now exceed $87 trillion. The unfunded liabilities represent future expected payments for Social Security, Medicare benefits for currently employed workers as well as current retirees and also the future retirement benefits of current federal employees and retirees.
If this enormous sum of already obligated future payouts is not bad enough, even scarier is the rate of growth of these unfunded liabilities. In calendar year 2011, the accrued expense was $7 trillion, double the entire current revenue of the federal government of about $3.5 trillion. In other words this awful problem is getting much worse every year.
The House Republican majority is trying to address our almost incomprehensibly bad debt problem. Will they be able to generate enough public support to force the Senate and the President to take the problem seriously? Right now the odds do not look very good for effective action to be taken. An enormous crisis is almost on our doorsteps. How bad will it have to get before public opinion demands action? It is very hard to remain optimistic about the future of our country when we appear to lack the collective will to take the action which is so obviously needed
You are correct in assessing the situation as dire as it is. However, the reality is that too many Americans are voting themselves a free lunch. The Obama deception team has masked inflation with a bogus CPI and is artificially holding interest rates low to juice the economy with near free cash causing a boom in the stock market. The country’s free lunchers and ignorant mavericks are drunk on cash and either in a state of denile or oblivious to reality. They are now asking sarcastically on Facebook, “With the market at 14,000, how can Obama be wrong?” The majority of people still believe Obama’s actions are good! Jack it will be years before the world can send a strong enough signal to bring these freeloaders and the ignorant back into reality, back into the realm of fiscal responsibility. My guess is 5 to 10 years, maybe more.
Such drama! An enormous crisis is almost on our doorsteps? Hard to be optimistic about the future of the country? Only if you believe the drama-queens at WSJ op-ed page and in the Republican congressional caucus. However, fans of arithmetic generally don’t pay any attention to these two groups as they have continually shown themselves to be completely incapable of even the simplest level of quantitative analysis.
In this case, they look at the net present value of all future government obligations over the next 75 years (and actually add it up wrong!) to get a really big, scary number. An honest analysis would then compare that to the net present value of GDP over the same period– the income that will be available to pay those obligations. But they don’t want an honest analysis, they want to scare people.
The facts? Not quite such high drama. The net present value of GDP is given in the same report they cite, and it’s about $907 trillion, which would only require an increase in taxes today of about 5% of GDP, or roughly 1 trillion dollars to cover all that liability (about $600 billion for the Medicare part of the liability):
Not so scary, huh? As I’ve said before, if Republicans want to cut entitlements on principle, they should just argue that. There is no point to lying about the numbers in such an insulting way– a child would know that you can’t look at liabilities without comparing them to assets.
As always, Republicans make endless dramatic claims, and It Does Not Add Up!
The article I reference above, by the two former Congressmen, Chris Cox and Bill Archer, point out that not only are the unfunded liabilities for future medicare and social security payments already huge, they are currently growing at a rate of over $7 trillion per year, while our GDP, which is currently about $15 trillion per year, is growing at a much slower rate of about 2% per year. In other words these entitlement liabilities are growing much faster than is our ability to pay for them in the future.
The 2012 Medicare Trustees’ Report, referenced by Cox and Archer, as well as by one of Jim’s sources, points out that total Medicare expenses, now about 3.7% of GDP, are projected to climb rapidly to 6% of GDP in 2040. In other words, just one government entitlement program by itself will take up almost 1/3 of government revenues (which historically average about 19% of GDP) within just a few years.
This, of course, assumes that current trends will continue which is exactly what the problem is. Current trends simply cannot continue! It is not a question of nasty Republicans wanting to cut entitlements but rather one party, at least, attempting to act in a fiscally responsible manner. Let’s just hope that the House Republicans are strong enough to stand their ground and do what needs to be done and that enough Americans will support the strong measures which are so badly needed to avoid the catastrophe which will otherwise soon be upon us.
Pingback: America’s $123 Trillion In Unfunded Liabilities: Forgive The Debt Now! « Political Vel Craft