The true U.S. government debt burden is vastly underestimated, because the Treasury Department’s balance sheet doesn’t list unfunded liabilities for Medicare, Social Security, and other big obligations, according to Chris Cox and Bill Archer.
Cox is former chairman of the Securities and Exchange Commission, and Archers is former chairman of the House Ways & Means Committee.
“As Washington wrestles with the roughly $600 billion fiscal cliff and the 2013 budget, the far greater fiscal challenge of the U.S. government's unfunded pension and health-care liabilities remains offstage,” the duo writes in
The Wall Street Journal.
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Economists generally focus on the amount of the budget deficit and government debt and their ratio to GDP. Thus the debt officially totals $15.96 trillion, more than 100 percent of GDP. And the budget deficit officially totals $1.1 trillion, 7 percent of GDP.
But, “the actual liabilities of the federal government — including Social Security, Medicare, and federal employees' future retirement benefits — already exceed $86.8 trillion, or 550 percent of GDP,” Cox and Archer write.
And “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.”
The issue is one of accurate balance sheets, the duo states. “Were American policy makers to have the benefit of transparent financial statements prepared the way public companies must report their pension liabilities, they would see clearly the magnitude of the future borrowing that these liabilities imply. Borrowing on this scale could . . . bankrupt the entire federal government.”
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