Our Real Federal Financial Condition
Making sense of our $61.9 trillion bill
The debt of the United States “was the price of liberty.” –Alexander Hamilton, 1790, First Report on the Public Credit
As of September 30, 2009, each American’s share of the $61.9 trillion national fiscal burden was over $200,000. And every year in which no down payments or reforms are made to these obligations and promises, the total grows by at least $2 trillion to $3 trillion – or $6,500 to $10,000 per person – on autopilot.
What is the debt and where does the money come from?
The debt is the total amount the federal government has borrowed to cover annual deficits (years in which federal spending exceeds federal revenue or income) over time. Within the past 40 years, the U.S. has experienced many more annual deficits than surpluses—leading to growing debt levels—as a result of wartime spending, program expansion, and economic recessions. Recently, however, our debt has reached significantly high levels.
The federal government borrows money from public lenders as well as from accounts within different parts of the government itself. $12.7 trillion, the figure most commonly cited as our "national debt," is the sum of these two numbers. This figure, however, is actually only one way of measuring the country’s financial condition—we can also count the money we have not yet spent, but have promised to Americans.
How this $61.9 trillion bill adds up
First, there are the federal government's known liabilities. These include publicly held debt, military and civilian pensions and retiree health benefits, and other miscellaneous liabilities like the stock-purchase agreements from the bailouts of Fannie Mae and Freddie Mac. As of September 30, 2009, these liabilities added up to $14.5 trillion.
Then there are various commitments and contingencies. These consist of the uncertainties involved in contractual requirements, like the risks assumed by insurers or lenders. These include federal insurance payouts (like FDIC), loan guarantees (like student loans), and leases. As of September 30, 2009, they added up to $2 trillion.
The remaining $43 trillion, almost three quarters of the total, is what the government has promised to pay in Social Security and Medicare benefits in excess of related revenues. As of September 30, 2009, current and promised future Social Security benefits amounted to $7.7 trillion. And between Medicare's three programs (hospital insurance, outpatient, and prescription drug), current and future promised Medicare benefits amounted to $38.2 trillion.
Keep in mind that although people rely on the promise of these benefits, the government can – and does – change these programs in ways that increase or decrease the value of the expected benefits, which has the effect of expanding or shrinking the total amount of promises. Such changes can be made to the size of payroll tax contributions, cost-of-living adjustments to benefits, beneficiary premiums, and eligibility ages and benefit levels.
Debt is, perhaps, the “price of liberty,” but what is the price of debt? Stick with www.pgpf.org to keep track of how much you owe.
SOURCE: PGPF based upon the 2009 Financial Report of the United States Government. Burden per person calculated using the latest US Census Bureau data for population as of March 2010. Other data as of September 30, 2009.
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