The Real Debt

 

 

 

 

"So tonite I'm gonna party like it's nineteen ninety-nineYeah, yeah, hey"

Prince

Oh boy! This is going to be fun! Ever since the election when I decided to move from reality to "La La Land", life has been good, very good. I grew tired of all those "nay sayers" telling me over and over again that we had nothing more than a spending problem. After a couple more sips of kool aid, I started to agree with them. In fact, I recently read some of the "Republican" leaders are also in agreement. We need to tax more and expect less. After all, elections do have consequences.

The only fly in the ointment is this "facts" thing. While I am really trying to jump on the band wagon, I keep getting tripped up by stubborn facts. For example, I recently came across a good article put together last year by three rather smart fellows, Liqun Liu, Andrew Rettenmaier and Thomas Saving. It addressed, in terms I could understand, what our real debt is.

One of the more relevant points of this article was the unbelievable amount of pension debt that we owe. While, it is true that our publicly held debt is high at slightly over 70 percent of GDP, it is still less than what Greece has (150% of GDP). However public debt is only a part of our government's total liabilities. For example, besides our public debt, federal civilian and military employees have accrued significant pension and other retirement benefits based on their employment in previous years. These obligations are already on the books and will be paid out in the future. It is estimated that in 2011, these federal employee pension and other retirement benefits and liabilities were over $7T.

It is now time to get to the real rub. Social Security and Medicare benefits payable to current retirees are not included as liabilities on federal balance sheets, though these two programs currently account for over one-third of federal spending. The public debt plus benefits payable to federal workers and the accrued Social Security and Medicare benefits payable to retirees total $30.3 trillion. This number is almost twice as high as the number we keep hearing about - our national debt of $16.25T and growing.

Wait - the report is not over yet. It actually gets worse. It gets very technical, so I will try any make this very simple. We also need to address what is known as the fiscal imbalance issue. This fiscal imbalance is equal to the current debt held by the public plus the unfunded obligations of all federal government programs, or the amount by which future expenditures exceed projected revenues. How much is this? If you add this amount to the $30.3T previously stated, the grand total comes up to $84T - and growing. Again, since the cost of the Affordable Care Act (ObamaCare) is not yet known, who knows where this number could end up.

So much for reading about the truth. I hate it. I am going back to "La La Land", have another big glass of kool aid, and relax. What is $84T among friends? We have rich folks in this land - let them take care of it. As for me, I am going to party like it is 1999, or 2012, or something. If we just ignore the facts, I am sure they will go away.

Post script: The reason I used the article I did for my facts was it was the one of the more conservative and credible that I came across. I found others which showed our total debt and liabilities over $100T.