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Your Share of Uncle Sam's Debt: $534,000
Saturday, July 16, 2011 12:38 PM
By: Forrest Jones
The gap between the money Washington takes into its coffers to pay its IOUs
and what it actually owes on those IOUs is taking on Grand-Canyonesque
proportions, with unfunded liabilities hovering around $62 trillion,
according to a USA Today analysis.
Yes, trillions, and trillions. And that breaks down to a staggering $534,000
per U.S. household, USA Today's analysis finds. By the end of September,
another $5,240 that has accumulated will push the Debt, Deficit,
Congresshousehold share to nearly $540,000.
Last year, the government raised $1.5 trillion in new debt to cover budget
deficits. Also last year, the government added $5.3 trillion to the amount
it owes in new financial obligations.
Repeat such patterns year after year, and it's no wonder how these
liabilities mount up. Most of those obligations are the result of programs
such as Medicare and Social Security.
Add to the problem, more and more people are going to retire over the coming
years and will expect the Medicare and Social Security services to which
they feel entitled.
Furthermore, people are living longer, and medical costs are going up, which
complicates the situation even more.
And on top of that, there are other public-sector IOUs out there that need
to be considered along side of Social Security and Medicare, such as veteran
and federal employee benefits.
In short, it's very hard to gauge the enormities of America's debts.
"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," says accountant Sheila Weinberg, founder of the Institute for
Truth in Accounting, a Chicago-based group that advocates better financial
reporting, says, "Without accurate accounting, we can't make good decisions,
" the newspaper reports
Last year, Medicare alone took on $1.8 trillion in new liabilities, while
Social Security racked up $1.4 trillion in fresh obligations.
As a whole, Medicare's total unfunded liabilities are estimated to be around
$25 trillion, while Social Security's should add up to $21.4 trillion.
That number comes from taking everyone in the system now, and then
calculating the difference between the taxes they should pay and the cost of
benefits they should receive.
In other words, Social Security liabilities outweigh tax money destined to
Social Security services by $21.4 trillion.
Lawmakers often throw around much lower numbers, for example, pointing to
Social Security's $6.5 trillion shortfall over a 75-year period.
That number is lower because it factors in future tax revenues from people
not in the system yet, USA Today points out.
Whatever the methodology may be, Democrats and Republicans agree on the need
to act now.
To help fix the problem, President Barack Obama wants to raise taxes on
wealthier Americans and cut spending, while Republicans are less keen on tax
hikes and rally behind deeper spending cuts.
But they have to agree on how much they can borrow in the meantime.
The country is up against its $14.3 trillion debt ceiling and to avoid
default, the more likely scenario involves lifting the borrowing limit,
which Congress must approve.
Republicans have said they will not approve the increase without attaching
deep spending cuts in return.
The U.S. Treasury says the country will default unless a deal is reached by
Aug. 2.
Negotiations between both sides are under way, and administration officials
say they are confident they'll reach a deal.
The debate makes foreign investors in the U.S. debt - Asian governments
especially - very nervous although analysts are confident Washington will
work out the debt ceiling issue.
"We think that the U.S. will pass the vote to increase the budget ceiling so
we don't think it will have structural implications for Asia," says Dariusz
Kowalczyk, senior economist at Credit Agricole CIB, according to The
Associated Press.
"But obviously the nervousness that surrounds the vote and the heated
political debate make it exceedingly clear to Asian central banks that
Treasuries are not such a safe avenue to investors countries as they use to
think." |
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