Frequently Asked Questions
About PGPF | Our Nation's Debts | Social Security, Medicare and Health Care
Budget, Tax and Spending | Personal Finances and Today's Economy
Getting Involved | Additional Resources
ABOUT PGPF
Q. What is the mission of PGPF?
A: PGPF is dedicated to increasing public awareness of the nature and urgency of key fiscal challenges threatening America's future, and to accelerating action on them. As a nonpartisan foundation, we neither lobby nor represent special interest groups.
Besides spearheading educational campaigns and citizen engagement efforts, PGPF dedicates significant financial resources in the form of grants to a variety of partner organizations seeking to engage the public and develop sensible solutions on our key issues.
Q: Does PGPF support or oppose any particular political party or party platform?
A: No. PGPF is nonpartisan and does not endorse or oppose any particular political party, elected official, or candidate for elective office. Our federal government is in serious financial trouble as a result of a leadership deficit on both sides of the aisle. All Americans—regardless of political views or party affiliation—face grave consequences if we do not begin to address these issues soon.
We remain cautiously hopeful that the new Administration will take the necessary steps to bring about the systemic changes we need. In the meantime, PGPF is working to bring Americans together to find sensible solutions that transcend age, party lines and ideological divides.
Q. When was PGPF launched?
A: PGPF was launched in July 2008. Pete Peterson, co-founder of the private equity firm The Blackstone Group, began working to establish PGPF immediately after Blackstone went public in 2007, pledging much of his newfound fortune to the foundation. Members of PGPF's leadership, including its founder and Chairman Pete, President and CEO Dave Walker and Vice President Gene Steuerle, have been fighting for fiscal responsibility for more than 30 years.
Q: Your founder Pete Peterson is a billionaire. How can someone with so much wealth credibly call for fiscal reform—especially if it will require significant changes to the way individual citizens and the government spend money and pay for the things we need?
A: Pete has put his money where his mouth is. If the necessary reforms are adapted to address this problem, Pete will certainly see his own taxes raised. A proponent of fiscal discipline for decades and co-founder of the nonpartisan Concord Coalition in 1992, he believes the wealthy should pay higher taxes and forego government-subsidized benefits they don't need.
And Pete is not alone in this effort. A growing number of prominent individuals spanning the spectrum of ideology, age, and net worth agree that fundamental reforms are needed to put our nation back on a prudent and sustainable fiscal path.
OUR NATION'S FINANCIAL CONDITION
Q: What does a "$62.3 trillion hole" mean?
A: $62.3 trillion in short, is the sum total of our federal government's debts and unfunded retirement and health care obligations as of September 30, 2009. These include publicly-held debt, pensions, retiree health care, and unfunded promises associated with certain entitlement programs (i.e., Social Security and Medicare). For more information on how the $62.3 trillion figure is calculated, read PGPF's explanation of our Real National Financial Condition.
Q: Why should Americans care if our federal government has promised $62.3 trillion?
A: Because it is $62.3 trillionthat our government does not have. This staggering amount breaks down to a $532,000 burden on every American household, or a $200,000 burden on every man, woman, and child in this country. At some point, we will either need to cut back on those promises and/or raise more revenues to fund them.
Q: How exactly does this $62.3 trillion add up?
A: As of September 30, 2009, the government had liabilities and unfunded obligations that add up to $62.3 trillion. Currently, we owe more than $14.5 trillion in publicly held debt, military and civil servant pensions, retiree health care and other miscellaneous liabilities. Through the Medicare and Social Security programs, we have made promises (as of September 30, 2009) to pay out benefits to eligible recipients in the future, with $38.2 trillion in unfunded commitments to Medicare and $7.7 trillion in unfunded commitments to Social Security. For more information on how the $62.3 trillion figure is calculated, read PGPF’s explanation of our Real National Financial Condition.
Q: Why is it a problem if the national debt grows?
A: Debt levels, at the highest they have been since World War II, have implications that extend beyond just higher interest payments and lower levels of investor confidence. The United States may be an unlikely candidate for defaulting on its debt, but the current levels of debt growth are unsustainable, and could lead to lower standards of living, lower domestic investment, and higher interest and inflation rates. The other catch—and it's a big one—is interest. The national debt is like the federal government's credit card balance, and, like a consumer who pays interest on personal credit card debt, our government must pay interest on the national debt. Based on a recent U.S. Government of Accountability Office estimate, absent meaningful reforms, the single largest expense item in the federal budget within twelve years is likely to be interest on the federal debt.
Q: Isn't the United States government simply borrowing from its own citizens, therefore keeping the nation's overall wealth relatively secure?
A: No. To finance deficits and our debt, the Treasury issues marketable securities to the public (e.g., state and local governments, banks, individuals, mutual funds and foreign investors). Because of Americans’ low rate of saving (which has been on a sharp downhill trend since the mid-1980s), and the country’s historic inability to adjust its spending to its revenues (we have balanced the budget only 6 times in the last 50 years), the federal government has become increasingly dependent on foreign lenders.
Today, foreign countries own half of America's publicly-held debt. Thus, when the money is paid back—with interest—it's not just flowing back into the U.S. economy; an increasing percentage is being sent overseas. In addition, relying heavily on foreign investors to finance our nation’s deficits serves to decrease our international influence and increase the influence that our foreign investors have on us.
Q: Won't economic growth let us solve our fiscal problems? If there's a bigger pie, doesn't that mean it will be easier to pay off our debts?
Unfortunately, our federal government's financial obligations and liabilities have grown so large that faster growth alone won't do it. In particular, health care costs are growing much faster that the economy. Long-term projections of economic growth from both the Government Accountability Office (GAO) and Congressional Budget Office (CBO) show that growth in our national debt will dwarf growth in the size of our economy. Both agencies predict that, unless major reforms are enacted, our national debt will be nearly three times the size of our economy by 2050.
SOCIAL SECURITY, MEDICARE AND HEALTH CARE
Q: Why is the cost of Social Security increasing?
A: Social Security is becoming more expensive primarily for demographic reasons, because people are living longer and collecting more benefits as a result. With fewer births, longer lives, and longer periods spent in retirement, there are fewer workers whose taxes can support those who retire.
Q: I thought Social Security beneficiaries receive what they paid into the program through payroll taxes? If so, how can the program have money issues?
A: When workers retire, their benefits are based on their prior wages, on which they paid payroll taxes. Most of those taxes were not saved, but spent immediately on current beneficiaries. Today, Social Security collects slightly more in taxes than it pays out in benefits. The federal government spends that extra money as well, for other purposes, and reflects the borrowing in special issue bonds. These bonds are converted to cash in years when benefit obligations exceed Social Security tax revenues.
According to current projections from the 2008 Social Security Trustees Annual Report, payouts will exceed the intake in Social Security taxes beginning in 2017, after which the Social Security Administration will need to rely on the money that has been set aside by "cashing in" their bonds. Since our federal government is expected to be running deficits in the future, it will have to find other ways to make good on these promises, such as by borrowing more money, cutting funding for other programs, or raising taxes.
After all special issue bonds have been cashed in, Social Security will have to rely exclusively on incoming payroll taxes, which will be insufficient to cover all promised benefits. Contrary to many young people's beliefs that they will not receive Social Security benefits when they are old enough to retire, the program will still exist when they are of retirement age. However, absent meaningful reform, available funds will be insufficient to pay 100% of promised benefits.
Q: What is PGPF's position on Social Security?
A: Social Security is a vital program that must be strengthened. As such, we should address its financing challenges now so that the program remains solvent, sustainable, and secure for both current and future generations. The good news is that Social Security is a relatively manageable part of our fiscal challenge and the easiest part of the social safety net to address. It accounts for 7.7 trillion of our $62.3 trillion fiscal hole, whereas Medicare accounts for $38.2 trillion of that hole. If we act now, relatively modest changes, some of which would be phased-in over time, can close this gap. A variety of solutions have been proposed for Social Security, including broadening the income levels subject to Social Security taxes, enhancing benefits for lower-income individuals while reducing benefits for higher-income individuals, recognizing longer life spans, and adding supplemental retirement accounts.
Q: Why is the cost of Medicare increasing?
A: Costs associated with Medicare are growing mainly because the cost of health care is rapidly growing. There are also a growing number of beneficiaries relative to taxpayers. Health care costs have been growing much faster than our economy, and are projected to continue to grow unless we reform the health care system.
Q: If rising health care costs are the major cause of federal government expenditures for programs like Medicare, does PGPF support fundamental health care reforms?
A: Comprehensive health care reform is essential. Costs are out of control and our system is inefficient and should do a lot more to provide adequate access and quality care. Reform measures should address coverage, cost, quality and personal responsibility, and should involve a wide range of actions ranging from greater use of technology for managing medical records to adopting a comprehensive set of evidence-based standards for the practice of medicine and the dispensing of prescription drugs.
While reform considerations for Medicare are undeniably tied to the underlying need for fundamental health care reform, there are several areas in which the Medicare program itself should be reformed. Measures should include cost-saving actions that ensure that the program rewards quality and efficiency, and improves primary and preventative care, while eliminating overpayments.
Escalating health care costs threaten to bankrupt America. Therefore, comprehensive health care reform should include measures which slow the rapidly increasing costs of the system and reduce the tens of trillions in unfunded obligations associated with our existing federal health care programs.
BUDGET, TAX AND SPENDING
Q: What is PGPF's position on tax reform?
A: Our nation's tax system is too complex and lacks credibility. Not surprisingly, many Americans question not only the equity of our system, but its ability to effectively and transparently raise revenues. The current tax system needs to be streamlined and simplified in order to promote economic growth, efficiency and equity. Furthermore, we must ensure that our tax system will generate enough revenue to pay our bills and deliver on the promises that the federal government intends to keep.
Q: What is PGPF's position on budget reform?
A: Currently, the federal budget process lacks sufficient discipline and transparency. We must do a better job of assessing the longer-term affordability and sustainability of various spending and tax proposals before they are enacted into law. Reforms to our federal government's budget process should include steps to control spending and restrict imprudent tax cuts, as well as curb government's tendency to permit "mandatory" spending programs and tax preferences to grow unchecked. This growth not only threatens large deficits; it reduces the ability of voters over time to decide how to devote their tax dollars to the most important needs of their time. This hardly seems fair, as each generation should have the right to make choices about the needs of its society without being locked in by the decisions made by elected officials of years past.
Q: Why not just eliminate earmarks and pork from the budget and give the President the line-item veto on unnecessary spending provisions?
A: All options will need to be on the table. But our fiscal challenges are so massive that eliminating all pork or earmarks and giving the President a line-item veto (the power to reject specific provisions of a bill, such as spending items, without vetoing the entire bill) would only address a tiny fraction of our overall fiscal gap.
Q: What about defense spending and the wars in Iraq and Afghanistan—aren't they creating huge deficits?
A: The costs of wars in Iraq and Afghanistan have been undeniably high, both in lives affected and dollars spent. And clearly, there has been a considerable amount of waste in related costs to date. Defense spending, like all government expenditures, must be carefully monitored because all wasteful spending contributes to the deficit—particularly spending that doesn't promote economic growth. PGPF President and CEO Dave Walker was a vocal critic of Pentagon waste during his tenure as U.S. Comptroller General. However, even if we pull all our troops out of Iraq and Afghanistan, the savings would only get the government a small fraction of the way toward restoring overall financial sustainability.
Q: What about ending the Bush tax cuts for the rich and fighting corporate corruption? Would that help solve the problem?
A: Corporate executives who engage in fraud or corruption should be prosecuted and punished for their crimes. However, cracking down on corporate corruption and ending the Bush tax cuts wouldn’t come close to addressing our fiscal gap.
Q: What about combining all these commonly discussed measures? How far would that get us toward solving our fiscal challenges?
A: All sensible proposals must be on the table. However, enacting all of these measures—eliminating earmarks, cutting spending in our wars overseas, giving the President the line-item veto, ending the Bush tax cuts—would only alleviate a fraction of the government’s fiscal challenges.
The truth—the one that few in Washington are willing to face—is that closing this enormous gap will require tax increases, spending cuts, and fundamental reforms, especially with respect to health care and entitlement programs.
PERSONAL FINANCES AND TODAY'S ECONOMY
Q: What is the economic significance of America's personal and household saving rates?
A: Savings is the portion of national output that is not consumed and represents resources that can be used to increase, replace, or improve the nation's capital stock. Among leading industrialized nations, the United States has one of the lowest saving rates. Retirement experts argue that many people nearing retirement have not accumulated enough assets to maintain their present living standard throughout their full retirement years.
Q: I have been financially responsible all my life. I save and watch my debt level. Is there anything more I can do to protect myself and my family from economic hardship caused by a lack of responsibility by others or the government?
A: For the millions of Americans who have made responsible financial choices their entire lives, the current state of our economy and our government's finances can be especially frustrating. Our country is in a recession and stimulus spending is necessary to turn our economy around. Many families today cannot put adequate funds aside due to immediate needs that cannot go ignored. It is especially critical during these hard times that Americans demand from Washington real solutions rather than more empty promises. For ideas on how to do this, visit our Get Involved section.
THE CURRENT ECONOMY
Q: What is the economic significance of America's personal and household saving rates?
A: Savings is the portion of national output that is not consumed and represents resources that can be used to increase, replace, or improve the nation's capital stock. Among leading industrialized nations, the United States has one of the lowest saving rates. Retirement experts argue that many people nearing retirement have not accumulated enough assets to maintain their present living standard throughout their full retirement years.
Q: I have been financially responsible all my life. I save and watch my debt level. Is there anything more I can do to protect myself and my family from economic hardship caused by a lack of responsibility by others or the government?
A: For the millions of Americans who have made responsible financial choices their entire lives, the current state of our economy and our government's finances can be especially frustrating. Our country is in a recession and stimulus spending and some targeted assistance efforts are necessary to turn our economy around. Federal policy should not reward bad behavior, whether it is by a corporation, its executives, or individuals who spend and/or take on debt at higher amounts than they cannot reasonably afford. It is especially critical during these hard times that Americans remain financially responsible and demand real solutions from Washington rather than empty promises. For ideas on how to do this, visit our Get Involved section.
Q. Our nation is already in crisis. How can we address these challenges and still meet the immediate economic needs of the American people?
A: We clearly are living in difficult economic times. Economists across the spectrum agree that we need stimulus spending now to combat the recession. However, while we tackle immediate problems in the short term, we can and must lay the critical groundwork necessary to put our country back on a fiscally prudent and sustainable path. One idea is to establish a "Fiscal Future Commission" (or task force) that, unlike most Washington commissions, would be designed to accelerate action rather than just talk about it. It should include selected Congressional members and Administration and non-governmental officials. It should engage the American people outside Washington's Beltway and leverage new technology and the web. After engaging the public and key stakeholders, it should recommend a range of budget control, entitlement, and other spending and tax reforms that would be subject to an "up or down' vote in Congress, with limitations on amendments so they would not undercut the fiscal bottom line of the commission's recommendations.
GETTING INVOLVED
Q. How can I help get our federal fiscal house in order?
A: Go to the Get Involved section of our website to learn about how you can help keep America safe, stable, and prosperous.
Q: How do I obtain a copy of your Citizen's Guide?
A: The Citizen's Guide to the State of the Union's Finances is a handy reference for Americans concerned about the economy. The Guide is a concise summary of where our nation stands financially and where it is headed fiscally. To download a PDF version of the Guide, click here.
Q: Can I link up with PGPF on any social networking sites and elsewhere on the web?
A: PGPF is on Facebook—check out our page. Dave Walker has his own Facebook page, as does I.O.U.S.A. Also keep an eye on the National Debt Twitter. PGPF has also teamed up with MTVu to produce the InDebtEd campaign, for college students to get involved and take action. Finally, visit YouTube to watch the 30-minute "byte-sized" version of I.O.U.S.A., and sign up for the I.O.U.S.A. YouTube channel.
Q: How do I contact PGPF?
A: Visit us on the web at http://www.pgpf.org/about/contact, or send us an email. For comments and questions, please send mail to comments@pgpf.org, and for press-specific queries, to press@pgpf.org.
ADDITIONAL RESOURCES
Q: Where can I find government data on the budget, debt, and projected deficits?
A: The Congressional Budget Office is a non-partisan government agency that publishes reports on both historical and projected government finances. A particularly useful document is the CBO Baseline, which projects the budget out ten years assuming current legislation is unchanged. The Government Accountability Office also publishes long-term projections using an alternative set of assumptions from the CBO. The Treasury Department publishes a Financial Report of the U.S. Government every December which includes estimates of the long-term costs of Medicare and Social Security. The Treasury also has a Debt-to-the-Penny application which offers the precise federal debt every day, and a net foreign holdings page which specifies how much we owe to each country. The Office of Management and Budget offers detailed information on the President's current budget, and historical information on past budgets.
The Committee for Responsible Federal Budget, the Tax Policy Center, The Center for Budget and Policy Priorities, and The Concord Coalition offer useful analysis of issues that affect the nation's finances and economic future.
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