The True Debt of the US

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The Wall Street Journal : Cox and Archer: Why $16 Trillion Only Hints at the True U.S. Debt

Despite the much touted debt of the United States, the mainstream media(MSM) usually reports on its debt-to-GDP just crossing 100% (or $16T). Well, ‘they do not begin to tell the story of the federal government’s true liabilities.

The article goes on to say…

The actual liabilities of the federal government—including Social Security, Medicare, and federal employees’ future retirement benefits—already exceed $86.8 trillion, or 550% of GDP. For the year ending Dec. 31, 2011, the annual accrued expense of Medicare and Social Security was $7 trillion. Nothing like that figure is used in calculating the deficit. In reality, the reported budget deficit is less than one-fifth of the more accurate figure.

These entitlement programs such as Medicare and Social Security are also known as unfunded liabilities. They need to be paid to year after year to continue – to ensure that Americans’ confidence in them remains. Herein lies the problem…

These real-world impacts will be felt when currently unfunded liabilities need to be paid. In theory, the Medicare and Social Security trust funds have at least some money to pay a portion of the bills that are coming due. In actuality, the cupboard is bare: 100% of the payroll taxes for these programs were spent in the same year they were collected.

Unfortunately, the US government cannot tax its way out of this…

“When the accrued expenses of the government’s entitlement programs are counted, it becomes clear that to collect enough tax revenue just to avoid going deeper into debt would require over $8 trillion in tax collections annually. That is the total of the average annual accrued liabilities of just the two largest entitlement programs, plus the annual cash deficit. ”

However…

“In short, if the government confiscated the entire adjusted gross income of these American taxpayers, plus all of the corporate taxable income in the year before the recession, it wouldn’t be nearly enough to fund the over $8 trillion per year in the growth of U.S. liabilities.”

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