It turns out that the federal government’s financial condition has deteriorated much more rapidly and significantly than is commonly understood – far more than the ~1.5 trillion in new debt that was incurred to finance the budget deficit.
Instead, USA Today is reporting that the government took on some $5.3 trillion in new financial obligations during 2010. Not surprisingly, a big chunk of these unmet obligations fell under Medicare and Social Security.
Adding these new obligations to the existing ones translates into a record of nearly $62 trillion in financial promises not paid for.
And if that particular number isn’t striking enough, perhaps putting it this way will get your attention: It translates into ~$534,000 in unfunded obligations for each individual household in the United States.
In addition to $534,000 being a breathtaking number in and of itself, it represents more than five times what Americans have borrowed for everything else (mortgages, car loans, college loans, etc.).
Now there’s certainly a big difference between the government and the private sector, of course. Corporations would be required to account for these new liabilities when they are taken on – and thereby report big losses to their shareholders. But unlike businesses, Congress can conveniently stave off recording these commitments until it’s ready to write the check. “See no evil … hear no evil …”
And here’s another big difference between the federal government and everyone else: the ability to “manufacture” greenbacks to pay for debt obligations. Whether we call it euphemistically “quantitative easing” or more bluntly “printing money,” that’s a solution that comes dangerously close to the famous quip attributed to H. L. Mencken: “For every problem, there’s a solution that is simple, elegant, and wrong.”
Sheila Weinberg, founder of the Chicago-based Institute for Truth in Accounting advocacy organization, raises another key point: “The [federal] debt only tells us what the government owes to the public. It doesn’t take into account what’s owed to seniors, veterans and retired employees. Without accurate accounting, we can’t make good decisions.” She has a good point.
The blind leading the deaf: It certainly doesn’t portend well for the future. But there’s always the hope that if we can somehow create robust future annual economic performance in the 4-5% range, we’ll grow our way out of the problem.
We’ll have to see about that.