How much do we really owe in federal financial obligations?

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From: Peter G Peterson Foundation

What is the Real National Debt?

"How exactly does a $56.4 trillion bill add up?" you ask. We know that the federal government carries both publicly held debt and debt for money it has borrowed from itself. Together, these sums are closing in on $11 trillion. This is the figure most commonly cited as our "national debt," but actually, that’s only the start of the REAL national debt.

Right now, you are carrying a burden of about $184,000. That is each and every American’s share of the US government’s approximated $56.4 trillion in current obligations. And every year in which no down payments or reforms are made to these obligations, the total grows by $2 trillion to $3 trillion – or $6,600 to $10,000 per person – on autopilot.

How exactly does this $56.4 trillion bill add up? First, there are the federal government’s known liabilities that it is legally obliged to fulfill. These include publicly held debt, military and civilian pensions and retiree health benefits. As of September 30, 2008, these liabilities added up to $12.2 trillion.

Then there are various commitments and contingencies – i.e., contractual requirements that the government is expected to fulfill when, and if specified conditions are met. These include federal insurance payouts, loan guarantees, and leases. As of September 30, 2008, they added up to $1.4 trillion.

So where does the remaining $43 trillion or so come from? That’s what the government has promised to pay in Social Security and Medicare benefits in excess of related revenues. As of January 1, 2008, current and promised future Social Security benefits amounted to $6.6 trillion. And between Medicare’s three programs (hospital insurance, outpatient, and prescription drug), current and future promised Medicare benefits amounted to $36.3 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 obligations. Such changes can be made to the size of payroll tax contributions, cost-of-living adjustments, beneficiary premiums, eligibility ages and benefit levels, among other examples.

That’s how you get to $56.4 trillion. And remember: every year in which no down payments or reforms are made to any of the obligations above, this total grows by $2 trillion to $3 trillion.

Stick with www.pgpf.org to keep track of how much you owe.

SOURCE: 2008 Financial Report of the United States Government. Social Security and Medicare benefits are present values as of January 1, 2008. Burden per person calculated using estimated December 2008 US Census Bureau data. Other data as of September 30, 2008.


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