That is the pro-government perspective. The progressives look at a Titanic 3 miles under water and are happy it isn't 6 miles down. Here is a more neutral view - http://www.justfacts.com/nationaldebt.aspAs of December 22, 2011, the official debt of the United States government is $15.1 trillion ($15,123,728,427,980). This amounts to: • $48,380 for every person living in the U.S. • $127,431 for every household in the U.S. * Publicly traded companies are legally required to account for "explicit" and "implicit" future obligations such as employee pensions and retirement benefits.   The federal budget, which is the "federal government's primary financial planning and control tool," is not bound by this rule.  * As of September 30, 2010 (the end of the federal government's fiscal year), the federal government has: • $7.3 trillion ($7,297,000,000,000) in liabilities such as federal employee retirement and veterans' benefits • $17.2 trillion ($17,195,000,000,000) in unfunded obligations for the Social Security program • $22.8 trillion ($22,800,000,000,000) in unfunded obligations for the Medicare program • $122 billion ($122,000,000,000) in unfunded obligations for two other "social insurance" programs called "Black Lung" and "Railroad Retirement" These unfunded obligations are referred to as "closed group present values" and are calculated in a manner that approximates how publicly traded companies are required to calculate their debts and obligations.   The figures represent how much money must be immediately placed in interest-bearing investments to cover the shortfalls between projected revenues and expenditures for all current taxpayers and beneficiaries in these programs.   * Combining the figures above with the national debt and subtracting the value of federal assets, the federal government has $56.5 trillion ($56,529,800,000,000) in debt, liabilities, and unfunded obligations as of September 30, 2010. * This shortfall is 103% of the combined net worth of all U.S. households and nonprofit organizations, including all assets in savings, real estate, corporate stocks, private businesses, and consumer durable goods such as automobiles.  * This shortfall equates to: • $182,914 for every person living in the U.S. • $480,949 for every household in the U.S. * These figures do not account for the future costs implied by any current policy outside of the “social insurance” programs listed above.* These figures are contingent upon the continuance of current federal law and "a wide range of complex assumptions" made by federal agencies." Regarding this:• Social Security's 2010 annual report states that "significant uncertainty" surrounds the "best estimates" of future circumstances.• Medicare's 2010 annual report states that the program's financial projections "do not represent a reasonable expectation for actual program operations in either the short range … or the long range" because: a) "Current law would require physician fee reductions totaling an estimated 30 percent over the next 3 years—an implausible result." b) The 2010 Affordable Care Act [Obamacare] eventually reduces "Medicare prices for hospital, skilled nursing facility, home health, hospice, ambulatory surgical center, diagnostic laboratory, and many other services" to "less than half of their level under the prior law. …. Well before that point, Congress would have to intervene to prevent the withdrawal of providers from the Medicare market and the severe problems with beneficiary access to care that would result. … [This] would lead to far higher costs for Medicare in the long range than those projected under current law."... redacted text down to footnotes 1-28 ... Web page: "The Debt to the Penny and Who Holds It." United States Department of the Treasury, Bureau of the Public Debt. Accessed December 23, 2011 at http://www.treasurydirect.gov/NP/BPDLogin?application=np As of 12/22/2011, the "Total Public Debt Outstanding" is $15,123,728,427,980. Dataset: "Monthly Population Estimates for the United States: April 1, 2010 to December 1, 2011." U.S. Census Bureau, Population Division, December 2011. http://www.census.gov/popest/data/national/totals/2011/index.html "Resident Population … December 1, 2011 [=] 312,602,730" CALCULATION: $15,123,728,427,980 debt / 312,602,730 people = $48,380 debt/person Dataset: "Average Number of People per Household, by Race and Hispanic Origin, Marital Status, Age, and Education of Householder: 2011." U.S. Census Bureau, November 2011. http://www.census.gov/population/www/socdemo/... Total households = 118,682,000 CALCULATION: $15,123,728,427,980 debt / 118,682,000 households = $127,431 debt/household Report: "Enron: Selected Securities, Accounting, and Pension Laws Possibly Implicated in its Collapse." By Michael V. Seitzinger, Marie B. Morris, and Mark Jickling. Congressional Research Service, Library of Congress, January 16, 2002. http://fpc.state.gov/documents/organization/7960.pdf Page 2: Among the disclosures of publicly traded companies are accounting statements. Since financial information is of little use to investors unless all firms use comparable accounting methods, the securities laws give the Securities and Exchange Commission broad authority to establish standards for financial reporting. The SEC has delegated the task of writing accounting standards to private sector bodies, and since 1973 the Financial Accounting Standards Board has been charged with formulating accounting and financial reporting standards. Summary of Statement No. 106: "Employers' Accounting for Postretirement Benefits Other Than Pensions." Financial Accounting Standards Board, December 1990. http://www.fasb.org/st/summary/stsum106.shtml This Statement establishes accounting standards for employers' accounting for postretirement benefits other than pensions…. It will significantly change the prevalent current practice of accounting for postretirement benefits on a pay-as-you-go (cash) basis by requiring accrual, during the years that the employee renders the necessary service, of the expected cost of providing those benefits to an employee and the employee's beneficiaries and covered dependents. … … The Board believes that measurement of the obligation and accrual of the cost based on best estimates are superior to implying, by a failure to accrue, that no obligation exists prior to the payment of benefits. The Board believes that failure to recognize an obligation prior to its payment impairs the usefulness and integrity of the employer's financial statements. … The provisions of this Statement are similar, in many respects, to those in FASB Statements No. 87, Employers' Accounting for Pensions, and No. 88, Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits. … This Statement relies on a basic premise of generally accepted accounting principles that accrual accounting provides more relevant and useful information than does cash basis accounting. … [L]ike accounting for other deferred compensation agreements, accounting for postretirement benefits should reflect the explicit or implicit contract between the employer and its employees. Book: Finance for Managers. By Richard Luecke and Samuel L. Hayes. Harvard Business School Press, 2002. Page 39: In contrast to cash-basis accounting, accrual accounting records transactions as they are made, whether or not the cash has actually changed hands. Most companies of any size use accrual accounting. This system provides a better matching between revenues and their associated cost, which helps companies understand the true causes and effect of business activities. Accordingly, revenues are recognized during the period in which the sales activities occur, whereas expenses are recognized in the same period as their associated revenues. See the three notes above for details regarding the manner in which publicly traded companies are required to calculate their debt and obligations using accrual-based accounting. The following note explains that the federal budget, in contrast, is calculated on a cash basis. More details are spelled out here. "2008 Financial Report of the United States Government." U.S. Department of the Treasury, 2008. http://www.fms.treas.gov/fr/08frusg/08frusg.pdf Page 21 (in pdf): "The President's Budget (Budget), the Government's primary financial planning and control tool, describes how the Government spent and plans to spend the money it collects. Page 30 (in pdf): President's Budget … Prepared primarily on a 'cash basis' "2010 Financial Report of the United States Government." U.S. Department of the Treasury, December 21, 2010. http://www.fms.treas.gov/fr/10frusg/10frusg.pdf Page 45: "United States Government Balance Sheets as of September 30, 2010, and September 30, 2009"Liabilities 2010 (billions $)Accounts payable 72.9Federal employee and veteran benefits payable 5720.3 Environmental and disposal liabilities 321.3Benefits due and payable 164.3Insurance program liabilities 175.6Loan guarantee liabilities 65.8 Liabilities to Government-Sponsored Enterprises 359.9Other liabilities 416.5Total of above (excludes national debt) 7,297 Calculated with data and facts from the "2010 Financial Report of the United States Government." U.S. Department of the Treasury, December 21, 2010. http://www.fms.treas.gov/fr/10frusg/10frusg.pdfPage 21: "Table 8, Social Insurance Future Expenditures in Excess of Future Revenues" 2010 (billions $)Total (Closed Group) 43,057NOTE: The figures below, which are the components of the total above, were included in the 2008 report but not in the 2009 and 2010 reports. The 2010 figures were provided to Just Facts by the Department of the Treasury on January 12, 2011.Social Security (Closed Group) 19,735Medicare (Closed Group) 23,181Other (Closed Group) 141 NOTES: - The "other" social insurance programs are the Railroad Retirement and Black Lung programs, as explained on page 3 of this report: "Statements of Social Insurance (SOSI). Amounts equal estimated present value of projected revenues and expenditures for scheduled benefits over the next 75 years of certain 'Social Insurance' programs (Social Security, Medicare Parts A, B, & D, Railroad Retirement - Black Lung is projected through 2040)." - In this report, the trust fund balances of the social programs are not included in the table above, as explained on page 127 of this report: "The present values of future expenditures in excess of future revenue [for the social insurance programs] are the current amounts of funds needed to cover projected shortfalls, excluding the starting trust fund balances, over the projection period." Just Facts accounts for these trust fund balances using the following data from the report.Page 128: "Social Insurance Programs Trust Fund Balances."Program 2010 (billions $)Social Security 2,540Medicare [total of various parts] 381[Other (total of Railroad Retirement & Black Lung)] 19Total 2,940 CALCULATIONS: (Closed Group Future Expenditures in Excess of Future Revenues) – (Trust Fund Balance) = Closed Group Unfunded Obligations Program Closed Group Future Expendituresin Excess of Future Revenues Trust Fund Balance Closed GroupUnfunded ObligationsSocial Security 19,735 2,540 17,195Medicare 23,181 381 22,800Other 141 19 122Total 43,057 2,940 40,117 See here, here, and here for details regarding the manner in which publicly traded companies are required to calculate their debt and obligations using accrual-based accounting. The following two notes show that the federal budget, in contrast, is calculated on a cash basis. These notes also show that accrual-based accounting is used in the "Annual Financial Report of the United States Government," which is the source for the shortfall figures cited above. "2008 Financial Report of the United States Government." U.S. Department of the Treasury, 2008. http://www.fms.treas.gov/fr/08frusg/08frusg.pdf Page 21 (in pdf): Each year, the Administration issues two reports which detail the financial results for the Government. The President's Budget (Budget), the Government's primary financial planning and control tool, describes how the Government spent and plans to spend the money it collects. By comparison, the accrual-based Financial Report of the United States Government (Report) includes the cost of operations, the sources used to finance those costs, how much the Government owns and owes, and the outlook for its social insurance programs. Page 30 (in pdf): President's Budget Financial Report of the U.S. GovernmentPrepared primarily on a 'cash basis' Prepared on an 'accrual basis' Report: "Understanding the Primary Components of the Annual Financial Report of the United States Government." U.S. Government Accountability Office, September, 2005. http://www.gao.gov/new.items/d05958sp.pdf Page 5: Accrual accounting, which is also used by private business enterprises, is the basis for U.S. generally accepted accounting principles for federal government entities. It is intended to provide a complete picture of the federal government's financial operations and financial position. The federal government primarily uses the cash basis of accounting for its budget, which is the federal government's primary financial planning and control tool. Page 6: The accrual basis of accounting recognizes revenue when it is earned and recognizes expenses in the period incurred, without regard to when cash is received or disbursed. The federal government, which receives most of its revenue from taxes, nevertheless recognizes tax revenue when it is collected, under an accepted modified cash basis of accounting. "2008 Financial Report of the United States Government." U.S. Department of the Treasury, 2008. http://www.fms.treas.gov/fr/08frusg/08frusg.pdf Page 51 (in pdf): The [social insurance] estimates are actuarial present values2 of the projections and are based on the economic and demographic assumptions representing the trustees' best estimates as set forth in the relevant Social Security and Medicare trustees' reports and in the relevant agency performance and accountability reports for the RRB and the Department of Labor (Black Lung). …2 Present values recognize that a dollar paid or collected in the future is worth less than a dollar today, because a dollar today could be invested and earn interest. To calculate a present value, future amounts are thus reduced using an assumed interest rate, and those reduced amounts are summed. Page 60 (in pdf): Participants for the Social Security and Medicare programs are assumed to be the "closed group" of individuals who are at least age 15 at the start of the projection period, and are participating as either taxpayers, beneficiaries, or both, except for the 2007 Medicare programs for which current participants are assumed to be at least 18 instead of 15 years of age. Page 105 (in pdf): The present values of future expenditures in excess of future revenue are the current amounts of funds needed to cover projected shortfalls, excluding the starting trust fund balances, over the projection period. They are calculated by subtracting the actuarial present values of future scheduled contributions and dedicated tax income by and on behalf of current and future participants from the actuarial present value of the future scheduled benefit payments to them or on their behalf. Report: "Social Security and Medicare Trust Funds and the Federal Budget." By James Duggan and Christopher Soares. Office of Economic Policy, U.S. Department of Treasury, March 2008. http://www.treas.gov/offices/economic-policy/reports/... Page 16: "The resulting present value is the amount that would have to be put in the bank today at the assumed interest rate to fund the future cash flows." “2008 Financial Report of the United States Government.” U.S. Department of the Treasury, 2008. http://www.fms.treas.gov/fr/08frusg/08frusg.pdf NOTE: In addition to the “closed group” projections, this report also contains projections for the “open-group” and “infinite horizon.” Details are below. Page 10: " 'Closed' Group and 'Open' Group differ by the population included in each calculation. From the [Statement of Social Insurance], the 'Closed' Group includes: (1) participants who have attained eligibility and (2) participants who have not attained eligibility. The 'Open' Group adds future participants to 'Closed' Group." Page 122: Current participants in the Social Security and Medicare programs form the "closed group" of taxpayers and/or beneficiaries who are at least age 15 at the start of the projection period. For the 2007 Medicare projections, current participants are at least 18 years of age at the beginning of the projection period. Since the projection period for the Social Security, Medicare, and Railroad Retirement social insurance programs consists of 75 years, the period covers virtually all of the current participants’ working and retirement years, a period that could be more than 75 years in a relatively small number of instances. Page 137: [W]hen calculating unfunded obligations, a 75-year horizon includes revenue from some future workers but only a fraction of their future benefits. In order to provide a more complete estimate of the long-run unfunded obligations of the programs, estimates can be extended to the infinite horizon. The open-group infinite horizon net obligation is the present value of all expected future program outlays less the present value of all expected future program tax and premium revenues. … In comparison to the analogous 75-year number in Table 5, extending the calculations beyond 2082, captures the full lifetime benefits and taxes and premiums of all current and future participants. The shorter horizon understates financial needs by capturing relatively more of the revenues from current and future workers and not capturing all of the benefits that are scheduled to be paid to them. "2010 Financial Report of the United States Government." U.S. Department of the Treasury, December 21, 2010. http://www.fms.treas.gov/fr/10frusg/10frusg.pdf Federal Debt, Liabilities, Obligations, and Assets as of September 30, 2010Category (Billions $)Publicly-Held Debt † ‡ 9,060Other Liabilities § 7,297Social Security Future Expenditures in Excess of Future Revenues # 19,735Medicare Future Expenditures in Excess of Future Revenues # 23,181Other Social Insurance Programs Future Expenditures in Excess of Future Revenues # 141Assets £ -2,884Total 56,530 NOTES: † Page 45: Federal debt securities held by the public and accrued interest as of September 30, 2010 = $9,060 billion ‡ The "Publicly-Held Debt" differs from the "National Debt" in that it excludes "intergovernmental debt," which is money the federal government owes to various trust funds such as Social Security's. Hence, to be consistent, the social program shortfalls shown in the table above do not include their starting trust fund balances. Facts regarding how and why the federal government keeps its books in this manner is covered in the section of this research entitled "Government Accounting." § See here. # See here. £ Page 45: "United States Government Balance Sheets as of September 30, 2010, and September 30, 2009"Assets 2010 (billions $)Cash and other monetary assets 428.6Accounts and taxes receivable, net 94.6Loans Receivable and Mortgage-Backed Securities, net 688.6TARP Direct Loans & Equity Investments, net 144.7Beneficial interest in trust 20.8Inventories and related property, net 286.2Property, plant, and equipment, net 828.9Debt and equity securities 98.9Investments in Government-Sponsored Enterprises; 109.2Other assets 183.3Total 2,883.8 Calculation performed with data from the footnote above and the report: “Flow of Funds Accounts of the United States, Third Quarter 2010.” Board of Governors of the Federal Reserve System, December 9, 2010. http://www.federalreserve.gov/releases/z1/current/z1.pdf Page 104: "Table B.100 Balance Sheet of Households and Nonprofit Organizations; Billions of dollars; amounts outstanding end of period, not seasonally adjusted … Assets … 2010 Q3 [=] 54,891.2" NOTE: Household assets detailed in this table include items such as real estate, corporate equities, mutual funds, equity in noncorporate businesses, life insurance, pension fund reserves, and consumer durable goods. Nonprofit organizations are explicitly named in the title of this table because their assets are not considered household property, whereas assets of for-profit entities are considered household property. CALCULATION: $56,530 Federal Debt, Liabilities, & Unfunded Obligations / $54,891.2 Total Assets of Households and Nonprofit Organizations = 103% Web page: "Updated PPI Commodity Weight Allocations to Stage-of-Processing Indexes." Bureau of Labor Statistics. Last modified February 18, 2009. http://www.bls.gov/ppi/ppisopallo.htm "SOP 3130 - Consumer Durable Goods: contains nonfood products, ready for final consumption, with a life expectancy of more than three years. Examples of durable goods include furniture, passenger cars, and appliances." Dataset: "Preliminary Annual Estimates of the Resident Population for the United States, Regions, States, and Puerto Rico: April 1, 2000 to July 1, 2010." U.S. Census Bureau, February 2011. http://www.census.gov/popest/eval-estimates/eval-est2010.html July 1, 2010United States 309,050,816 CALCULATION: $56,529,800,000,000 / 309,050,816 people = $182,914/person Dataset: "Average Number of People per Household, by Race and Hispanic Origin, Marital Status, Age, and Education of Householder: 2010." U.S. Census Bureau, November 2010. http://www.census.gov/population/www/socdemo/hh-fam/cps2010.html Total households = 117,538,000 CALCULATION: $56,529,800,000,000 / 117,538,000 households = $480,949/household "2008 Financial Report of the United States Government." U.S. Department of the Treasury, 2008. http://www.fms.treas.gov/fr/08frusg/08frusg.pdf Page 28 (in pdf): The SOSI [Statement of Social Insurance] provides additional perspective on the Government's long term estimated exposures and costs. However, it should be noted that the Government's financial statements do not reflect future costs implied by any current policy, such as national defense, the global war on terrorism, and disaster relief and recovery. "2010 Financial Report of the United States Government." U.S. Department of the Treasury, December 21, 2010. http://www.fms.treas.gov/fr/10frusg/10frusg.pdf Page 5: "Further, the long-term nature of these costs and their sensitivity to a wide range of complex assumptions can, in some cases, cause significant fluctuation in agency and Governmentwide costs from year to year. … At VA and other agencies that administer postemployment benefit programs, these fluctuations are attributable to an array of assumptions and variables including interest rates, inflation, beneficiary eligibility, life expectancy, and cost of living." Page 131: "Assumptions are made about many economic and demographic factors, including gross domestic product (GDP), earnings, the CPI, the unemployment rate, the fertility rate, immigration, mortality, disability incidence and terminations and, for the Medicare projections, health care cost growth." "2010 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." United States Social Security Administration, August 9, 2010. http://www.ssa.gov/OACT/TR/2010/tr2010.pdf Page 7: "The intermediate demographic and economic assumptions shown in table II.C1 reflect the Trustees' best estimates of future experience, and therefore most of the figures in this overview depict only the outcomes under the intermediate assumptions. Any projection of the future is, of course, uncertain. For this reason, alternatives I (low-cost) and III (high-cost) are included to provide a range of possible future experience." Page 15: "Uncertainty of the Projections … Significant uncertainty surrounds the intermediate assumptions." "2010 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds." Centers for Medicare & Medicaid Services, August 5, 2010. https://www.cms.gov/ReportsTrustFunds/downloads/tr2010.pdf Pages 281-282: STATEMENT OF ACTUARIAL OPINION … ... Current law would require physician fee reductions totaling an estimated 30 percent over the next 3 years—an implausible result. Further, while the Patient Protection and Affordable Care Act, as amended, makes important changes to the Medicare program and substantially improves its financial outlook, there is a strong likelihood that certain of these changes will not be viable in the long range. Specifically, the annual price updates for most categories of non-physician health services will be adjusted downward each year by the growth in economy-wide productivity. The best available evidence indicates that most health care providers cannot improve their productivity to this degree—or even approach such a level—as a result of the labor-intensive nature of these services. Without major changes in health care delivery systems, the prices paid by Medicare for health services are very likely to fall increasingly short of the costs of providing these services. By the end of the long-range projection period, Medicare prices for hospital, skilled nursing facility, home health, hospice, ambulatory surgical center, diagnostic laboratory, and many other services would be less than half of their level under the prior law. Medicare prices would be considerably below the current relative level of Medicaid prices, which have already led to access problems for Medicaid enrollees, and far below the levels paid by private health insurance. Well before that point, Congress would have to intervene to prevent the withdrawal of providers from the Medicare market and the severe problems with beneficiary access to care that would result. Overriding the productivity adjustments, as Congress has done repeatedly in the case of physician payment rates, would lead to far higher costs for Medicare in the long range than those projected under current law. For these reasons, the financial projections shown in this report for Medicare do not represent a reasonable expectation for actual program operations in either the short range (as a result of the unsustainable reductions in physician payment rates) or the long range (because of the strong likelihood that the statutory reductions in price updates for most categories of Medicare provider services will not be viable).NOTE: Credit for bringing this fact to our attention belongs to Alex Adrianson of the Heritage Foundation. [Commentary: "What If Things that Have No Chance of Happening Happen? Asks Medicare’s Actuaries." By Alex Adrianson. InsiderOnline, August 12, 2010. http://www.insideronline.org/blogarchive.cfm?month=...] For explanation of the differences between "total" and "current" expenditures, see http://faq.bea.gov/cgi-bin/bea.cfg/php/enduser/... and http://www.bea.gov/scb/pdf/2008/03March/0308_primer.pdf*** end paste ***Things get uglier when looking at http://www.shadowstats.com/ a site which is biased toward the mathematically literate. You may want to check actual inflation with shadowstats, and note our federal reserve is buying a lot of U.S. Treasury debt to keep the rate artificially lower. The bill for doing that comes later, after 2012, maybe even up to 2014, when inflation starts to hit, once the newly minted trillions of dollars start to circulate through economy.
Tom the reason the authors call unfunded government entitlements obligations instead of liabilities is due to the fact that there is no contractual reqirement to pay. Our government could vote to repeal all entitlement programs tomorrow. As such, they aren't liabilities, but obligations under current law. There exists no legally enforceable contract to maintain entitlement funding beyond current law. What entitlements we have, and what they provide, can be reformed or repealed at any time by any Congress. No company has this power.
Tom,The problem of debt, is it's an economic self destruct device. When a country has too much debt, it's currency collapses or massive cuts are imposed with little thougt to their consequence.The riots in Greece are over 50% cuts to promised pension payments. If Medicare cut payments by 50% and Social Security cut benefits by 50% along with VA and other government pensions, we'd have riots here too.Both parties are guilty, but the current administration is in a class by itself. I agreed with Nancy Pelosi years ago when she stated the Bush 440 billion dollar deficits weren't acceptable. Unfortunately 1.3 trillion dollar deficits ARE acceptable to Pelosi under Obama. IMO $440 billion was acceptable, multi trillion dollar deficits into the indefinite future will crash our currency.Ever see a trillion Deutsch mark note? I have, it was printed on one side to save ink. It didn't buy anything, people took them to market and even with thousands of trillion mark notes couldn't purchase anything. The economy had broken catastrophically due to hyper inflation.We should be wary of dismissing debt as an issue. Politicians love debt, because it allows them to spend money they don't have without directly taxing anyone. The resultant inflation happens later, after elections.I can't find a trillion mark note online, but here is a link to an image of a 500 billion mark note - http://snyderstreasures.com/images/paper/currency/500MillionRMDR1Feb24F.jpg as with the trillion printing was on one side only.
We have a complex economic system, and predicting the time of it's failure isn't possible. However, the Federal Reserve is keeping interest rates low and buying a lot of Treasury notes. Interest rates are low in large part due to the Federal Reserve creating money to cover the needs of the Treasury. The Federal Reserve is determined to keep interest rates low.