If the federal government were a business, national debt would be $130 trillion

The national debt is out of control
Honestly, I have a hard enough time wrapping my head around the current official figure of $14 trillion, so finding out that the national debt is almost 10 times that amount is staggering.

The debt numbers start to get really hairy when you add in liabilities under Social Security and Medicare - in other words, when you account for the present value of those future payments in the same way that businesses have to account for the obligations they incur. Start with the entitlements and those numbers get run-for-the-hills ugly in a hurry: a combined $106 trillion in liabilities for Social Security and Medicare, or more than five times the total federal, state, and local debt we've totaled up so far. In real terms, what that means is that we'd need $106 trillion in real, investable capital, earning 6 percent a year, on hand, today, to meet the obligations we have under those entitlement programs. For perspective, that's about twice the total private net worth of the United States. (A little more, in fact.)

Suffice it to say, we're a bit short of that $106 trillion. In fact, we're exactly $106 trillion short, since the total value of the Social Security "trust fund" is less than the value of the change you've got rattling around behind your couch cushions, its precise worth being: $0.00. Because the "trust fund" (which is not a trust fund) is by law "invested" (meaning, not invested) in Treasury bonds, there is no national nest egg to fund these entitlements. As Bruce Bartlett explained in Forbes, "The trust fund does not have any actual resources with which to pay Social Security benefits. It's as if you wrote an IOU to yourself; no matter how large the IOU is it doesn't increase your net worth. . . . Consequently, whether there is $2.4 trillion in the Social Security trust fund or $240 trillion has no bearing on the federal government's ability to pay benefits that have been promised." Seeing no political incentives to reduce benefits, Bartlett calculates that an 81 percent tax increase will be necessary to pay those obligations. "Those who think otherwise are either grossly ignorant of the fiscal facts, in denial, or living in a fantasy world."

There's more, of course. Much more. Besides those monthly pension checks, the states are on the hook for retirees' health care and other benefits, to the tune of another $1 trillion. And, depending on how you account for it, another half a trillion or so (conservatively estimated) in liabilities related to the government's guarantee of Fannie Mae, Freddie Mac, and securities supported under the bailouts. Now, these aren't perfect numbers, but that's the rough picture: Call it $130 trillion or so, or just under ten times the official national debt.

The liabilities of Social Security and Medicare are the largest and scariest, but read the whole thing to see where the rest of the debt comes from.

The numbers show the folly of these liberal programs - especially defined-benefit pensions, Social Security and Medicare. The fact is, they're broke. It's easy to make a promise and backload a program's costs (hello, Obamacare), but politicians can't change the fact that there's no such thing as a free lunch. How compassionate is it to create a program that's going to be bankrupt at the exact time the largest number of people are going to be counting on it?

But since liberals don't understand basic economics, I guess it's not surprising that they think they can provide health care and retirement to everyone without understanding the opportunity cost of such promises. If economic principles are too difficult for liberals (of either party) to understand, then they should at least look to socialist countries that are a little further along the road of liberal policies than we are and understand where our country (without a major correction) is heading.

blog comments powered by Disqus