| America's hidden debt
Posted: 5/16/2008 5:19:59 AM | I stumbled across a rather unsettling article on US debt, while researching the impact of McCain's tax cut proposals.
It's not good, and I don't know if many Americans know about it.
I certainly didn't, and it's an eye opener.
Those numbers we all see for US debt seem to be overlooking certain things, and that's not accidental.
Consider the proud trumpeting that came from Washington at the close of fiscal 2007. The deficit for the unified budget was, politicians crowed, down to a mere $162.8 billion.
In fact, the U.S. government is overspending at a far greater rate. The total federal debt actually increased by $497.1 billion over the same period.
But politicians of both parties use happy numbers to distract American voters. Democrats routinely criticize the Republican administration for crippling deficits, but they politely use the least-damaging figure, the $162.8 billion. Why? Because references to more-realistic accounting would reveal vastly greater numbers and implicate both parties.
You can understand how this is done by taking a close look at a single statement on U.S. federal finance from the president's Council of Economic Advisers. The September statement shows that the "on-budget" numbers produced a deficit of $344.3 billion in fiscal 2007. The "off-budget" numbers had a surplus of $181.5 billion. (The off-budget figures are dominated by Social Security, Medicare and other programs with trust funds.)
Combine those two figures and you get the unified budget, that $162.8 billion. In the past eight years there's been two years of reported surpluses and six years of reported deficits. Altogether, the total reported deficit has run $1.3 trillion.
Some numbers don't add up
But if you examine another figure, the gross U.S. federal debt, you'll see something strange. First, the U.S. debt has increased in each of the past eight years, even in the two years when surpluses were reported. Second, the gross federal debt, which includes the obligations held by the Social Security and Medicare trust funds, has increased much faster than the deficits -- about $3.3 trillion over the same eight years.
That's $2 trillion more than the reported $1.3 trillion in deficits over the period. Can you spell "Enron"?
In other words, while the reported deficits averaged $164 billion over the past eight years, U.S. government debt increased an average of $418 billion a year. That's a lot more than twice as much.
How could this happen?
Easy. The U.S. Treasury Department simply credits the Social Security, Medicare and other trust funds with interest payments in the form of new Treasury obligations. No cash is actually paid. The trust funds magically increase in value with a bookkeeping entry. It represents money the American government owes itself.
So what happens if the funny money is taken away?
When the imaginary interest payments are included, Social Security and Medicare are running at a tranquilizing surplus (that $181.5 billion mentioned earlier). But measure actual cash, and the surplus disappears.
In 2005, for instance, the U.S. Social Security Disability Income program started to run at a cash loss. 2007 is the first year that Medicare Part A (the hospital insurance program) benefits exceeded income.
The same thing will happen to the U.S. Social Security retirement-income program in six to nine years, depending on which of the trustees' estimates you use. During the same period, the expenses of Medicare Part B and Part D, which are paid out of general tax revenue, will rise rapidly.
Despite this, the U.S. Social Security Administration writes workers every year advising them that the program will have a problem 34 years from now, not six or nine years. In fact, the real problem is already here. It will be a big-time problem in less than a decade.
http://finance.sympatico.msn.ca/investing/
insight/article.aspx?cp-documentid=5750084
Now the interest payments alone, on that debt, are staggering.
Interest Expense on the Debt Outstanding
The Interest Expense on the Debt Outstanding includes the monthly interest for:
* U.S. Treasury notes and bonds
* Foreign and domestic series certificates of indebtedness, notes and bonds
* Savings bonds
* Government Account Series (GAS)
* State and Local Government series (SLGs) and other special purpose securities.
http://www.treasurydirect.gov/govt/reports/ir/ir_expense.htm
And for 2008, here's what those interest rates mean in monthly cost :
Interest Expense Fiscal Year 2008
April $22,362,345,451.78
March $23,023,540,357.53
February $20,037,492,573.51
January 24,686,746,422.35
December 106,138,177,851.45
November 25,344,987,578.31
October 22,310,362,733.54
Fiscal Year Total $243,903,652,968.47
- Ibid
And how much have these costs risen ?
Available Historical Data Fiscal Year End
2007 $429,977,998,108.20
2006 $405,872,109,315.83
2005 $352,350,252,507.90
2004 $321,566,323,971.29
2003 $318,148,529,151.51
2002 $332,536,958,599.42
2001 $359,507,635,242.41
2000 $361,997,734,302.36
1999 $353,511,471,722.87
1998 $363,823,722,920.26
1997 $355,795,834,214.66
1996 $343,955,076,695.15
1995 $332,413,555,030.62
1994 $296,277,764,246.26
1993 $292,502,219,484.25
1992 $292,361,073,070.74
1991 $286,021,921,181.04
1990 $264,852,544,615.90
1989 $240,863,231,535.71
1988 $214,145,028,847.73
- Ibid
That's almost a doubling of interest payments alone, over twenty years.
Anyone else see the implications of this, as the Baby Boomer's retire, and the population ages ? There's a demographic time bomb ticking, and that has some strong potential of seriously altering American life in perhaps as little as ten years.
Fed Chairman Ben Bernanke warned the U.S. Congress on Thursday that failure to take action soon to deal with the budgetary strains posed by an aging U.S. population could lead to serious economic harm. Bernanke cited projections by the Congressional Budget Office that showed spending on entitlement program would reach about 15 percent of U.S. gross domestic product by 2030.
One of the biggest failures of our government at all levels is we have not responded to a problem that has been staring us in the face for decades. We have waited way too long. Time is short, and the baby boomers are getting older." -U.S. Sen. Russ Feingold (D-WI)
As Senator Feingold explains and as we see in the Figure above, there will be great demographic changes in the coming years. Between 1995 and 2000, there were 35,320,000 individuals in the U.S. over 65 years. This figure is projected to more than double to over 77,010,000 between 2030 and 2040. During this time, the percentage of the U.S. population over 65 will grow from 12.8% to 20.7%. Even more dramatic is the growth in the oldest population group, aged 85 years and over. In 1990, there were approximately 3,060,000 individuals in this group; by 2000 the figure grew to 4,260,000. By 2050, it is estimated that this category will jump to 18,220,000 individuals (all facts U.S. Census Bureau 2004). Our target market is the largest growing demographic globally.
http://ageathome.blogspot.com/2007/01/baby-boomer-time-bomb.html
This type of population bulge demographically will create havoc on the American standard of life, if it's not addressed, and we add to it that "hidden debt" cost - which are the type of entitlements we know these retirees will increase rather dramatically. | |
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| America's hidden debt
Posted: 5/16/2008 5:28:32 AM | I just read an article about life expectancy.For people to live to be 100 it is likely that if you were born in 2000 barring epidemics and war you have a .8% better chance than someone born in 1900 at only 1.2%.
So if someone does the math what is .8 % of 300 million people in the U.S.Who will
live maybe35+ years past retirement age?I believe in Social security but how will those centenarians(?) survive with less money to go around? | |
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| America's hidden debt
Posted: 5/16/2008 5:56:35 AM | I see a Soviet-style economic collapse for the US as almost unavoidable in the next ten years, for many or the same reasons. The debt load is staggering, still increasing & collapse can only be staved off by continued borrowing.
I doubt I will ever see any 'dividend' from my lifetime investment in SS & Medicare. Subtle ploy, that they use Entitlement to discribe a return on investment in order to preload the sentiments of the voting public.
The powers that be who already have 'theirs' & are not worried about suffering thru that kind of collapse have forgotten one thing: unlike the Soviet collapse, everyone in the US is armed.
Our next civil war will be private militias against starving family men. | |
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| America's hidden debt
Posted: 5/16/2008 6:17:22 AM | I think the baby boomer retirement wave over the next ten years will seriously stretch the budget out, but people in their 20's-40's now are REALLY going to get screwed.
It is sooooooo odd to me that some of these same people would vote for a guy like McCain who would continue these foreign misadventures at huge costs when we really need that money at home plowed back into social programs.
Really, how the heck do we expect any solvency at all with this debt and ongoing war expenses of about $700 million a day?
And these same people talk about a new front in Iran? Huh? Ya think Iran would just take a few bunker busters on its sovreign terrority and not shut down the Persian Gulf which would send gas up there to, what, $25 a gallon if you can get it?
All because of binLaden and some crazies on 911 or that Iran "might" have some potential for a bomb in 5-10 years?
Does that make any sense at all?
We are committing financial suicide........well, the politicians arent, actually, they are growing very, very rich. | |
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| America's hidden debt
Posted: 5/16/2008 7:30:54 AM | I'm surprised that most people didn't realize this; it is NOT new!! The federal government has been "borrowing" from our social security taxes for years; also where do you think the money goes when you "buy" savings bonds? Doesn't really matter if the federal budget is spent in Iraq or for social programs, the federal credit card is about maxed out and the payments are going to increase. Yes, the coming retirement of the largest group in American history is going to cause an economic crisis. The federal government is going to have to find a way to repay those "loans" to fund social security payments and demanded social programs for the masses.
1. Significant increase in taxes
2. Significant reduction in SS benefits
3. Borrow more from foreign sources
4. Inflate the money supply
Which would you vote for? 
This whole mess is further complicated by a large group of 50-60 year olds who do not have any amount of their own resouces for their old age and will expect government to help them with more social programs. Just saw a statistic on tv that over 30% of people over 45 have less than $10,000 in retirement savings and 1/2 the population has less than $100,000. Who is going to support them? 
IMHO, there will be significant clashes between working and retired as well as between those who have saved for their retirement and those who haven't.  | |
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| America's hidden debt
Posted: 5/16/2008 7:57:39 AM | It's darkly ironic that the government is admonishing it's citizens for not saving more when they are pre-spending the portion of our taxes they are themselves charged w/ 'saving'.
Plus, it's more difficult to save when pay scales have risen only a percentage of what the cost of living has.
Retirement, for most, will be a thing of the past.....you will work for the Company store from cradle to grave, just as in the past when the division of wealth was as disparate as it is rapidly becoming.
"So?" = the new "Let them eat cake". | |
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| America's hidden debt
Posted: 5/16/2008 9:16:41 AM | This is not news, and it only highlights the fact that the deficit - on a year to year basis - isn't the core problem. The biggest contributor is projected entitlement spending. The deficit itself simply adds to the mounting problem, and limits our options for dealing with the crisis.
Note that the popular fix advocated by the Democrats - raising the limit on social security contributions above 90k - makes the problems worse. It means more revenue today, so that you can balance your budget, but greater entitlements tomorrow as the high-wage earners draw accordingly higher benefits. (Benefits are based on how much you put in, computed with higher-rates of interest for low wage earners.) | |
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| America's hidden debt
Posted: 5/16/2008 5:19:16 PM | Nightwing66, you are quite right. Retiring at 65 will be a distant memory probably within 5 years for many. They are most certainly going to have to raise the eligibility age for Medicare and Social Security to 70, if not 72, to keep it going.
but as long as our boys are "over there" killing small, brown people until 2013 or so when other brown people can kill them, then they arent "over here" killing us........so I'm happy>  .....even if it costs us $6 trillion or so, which is what the tab mcCain is offering runs. | |
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| America's hidden debt
Posted: 5/16/2008 5:35:13 PM | I read all we have to do is for each family in America pay their fair share of $500,000.00 each and its all over! To all the Politicians and Professional sports players and Movie actors and Musicians that all made millions from average Joe and Jane. Hey they will all bail us out! No? Whats the big deal? We could just do what everyone has done when they can not balance there books. Claim bankruptcy chapter 11. Or give it to our grand kids and let them sweat it out.
What a Joke! | |
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| America's hidden debt
Posted: 5/16/2008 5:48:10 PM | This is not new news.
America will find a way to survive. Adjustments will be made.
If these websites are still around, the same people will be here arguing about America's budget and political landscape rather than worrying about their own lands.
What I do think will happen is that the USA will turn more and more inwardly and drop a lot of the nonsense entitlement programs... Those people will scream and shout of course. But, more will be forced to get off their lazy behinds, quit having a dozen kids and go to work.
Other Nations will suffer due to our diminished aid to them and/or our attentiveness going towards mainly the USA. They will accuse of us of not caring enough. Just like they are accusing us of overrunning them now.
And, so it goesssssssssssss..... | |
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| America's hidden debt
Posted: 5/16/2008 9:26:08 PM | In the early 1980's I had to deal with a whole litany of screaming about entitlement programs for 'lazy' single parent families (at that time, primarily female headed households) when starting a non-profit to serve that demographic. The news flash is that many of these entitlements for the "lazy" are gone.
We're going to be looking at an entirely new demographic of the poor, frail, sick AND homeless elderly in a few years. Hell, they're already being dumped from one emergency room to another. That's the adjustment that we're going to make. Who's kidding whom? The rich in this country are perfectly comfortable with a growing percentage of the US population 'adjusting' to impoverished standards of living and that's the only adjustment that's going to be made unless we put pencil to paper and change the direction we're headed in. The measure of compassion of any society is gauged by how we treat the most disenfranchised. We're failing here....and not because so many of us are lazy. | |
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| America's hidden debt
Posted: 5/16/2008 11:04:51 PM | the American national debt is somewhere in the vacinity of 50-60 trillion dollars if you take into account the entitlements we have promised for the next 25 years that we have no way to pay for. Social security alone is somewhere around 30 trillion of that as baby boomers are starting to retire. This is the massive flaw in the Democratic parties plan for the country. we already hold a debt, have entitlements we cannot pay for, and they want to add more but don't ever mention things like raising taxes. They are the party "working for the common man' but where is the money going to come from? Call me crazy but it has to come from somewhere. Leaving Iraq isnt going to pay for all these pet projects, not even close.
I know where they plan on getting the money (at least some of it, you are fooling yourself if you think they are going to actually reduce the debt at all). They are going to raise taxes on corperations and business in general. You know, those evil empires with CEO's perched on their thrones like gods who eat the souls of the innocent? Unfortunately, they are also the ones who pay people to work for them, and they can pay far less in Asia for people who are excited to get the money they do get for the menial labor they perform. You start getting into a slippery slope when you start taxing businesses too high. look at what happened when FDR tried increasing certain business taxes up to 80%.......they closed down and made the economic depression worse. There has to be some incentive to succeed in this country. but democrats seem to want to make it a hard cap on earnings without looking at how much you put into the business and the economy as a whole.
The perfect example is the oil industry. They were accused of having "windfall profits" when their profit margin (the amount of profit per how much the company made in income total) was less than a rediculous number of industries. The worst is corn, which the government mandated corn be now used for ethanol (which also increased world food costs) which had nearly double the profit margin. If, as was wanted, corn was almost equal to oil in production would congress now bitch and complain about the corn industry making 80 billion dollars? prolly not, they like to keep the corperate farms happy. They could care less about oil though.
end rant | |
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| America's hidden debt
Posted: 5/17/2008 1:00:17 AM | Seeing as how most Americans are in debt up to their eyeballs... it only seems right that the government would be as well.
It's just un-American to be debt-free!
--Brandon | |
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| America's hidden debt
Posted: 5/17/2008 1:10:43 AM | .
Mg;
This gig only gets better. glad you brought this up.
Here is a real gut buster.
Ok so bushco gets us into thei nice little war on oil ok.
starts borrowing money to pay for it in roughly 2002 ish.
As he borrows the money a constant withdrawal his costs are increasing as the dollar devaluates.
So the more he borrows, the more the dollar devaluates, hence the more he has to borrow to pay for the same amount of goods k?
Right now every gallon of milk for instance is 4 bucks instead of 1.50 like it was when he first started. Getting a visual yet?
Ok now here is the kick in the azz.
So when inflation ratchets upward the bill automatically adjusts upward with inflation.
Lets say we start to pay is off and turn it around in 2009.
Now there is a 10 trillion dollar "number" on that bill that includes inflation adders all along the way... So when the taxes start being collected to pay for it all and we actually get it to turn around the interest tickers keep right on ticking and when the value of the dollar starts coming back that number on the bill does not automatically adjust lower to match the corresponding revaluation.
So what they are doing is using worthless money to pad the bill and you are paying it back with money of a higher value as dollar regains its strength.
I am sure you got my point but what that means is, lets say inflation is 50% on the way up hence you pay 2wice as much for goods in 2008 as you did in 2002. You add to the deficit twice as fast.
However when the value of the money starts coming back the reverse never takes place.
So if the money comes back 50% such that our dollar is again equal to the value it was in 2002, in essense we will have paid for roughly 3 times that deficit amount because of being cheated by the inflation and then the interest as the cherry on top.
And people thought ron paul was a kook when he said get rid of the federal reserve. They will soon find out who the real kooks are as all the problems people are mentioning in this thread are very real and certainly a plausible outcome and it could very well get extremely ugly.
anyway good post.
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| America's hidden debt
Posted: 5/17/2008 7:16:39 AM | Unfortunatly, we will not hear much about this problem and the painful steps that must be taken to deal with it. Putting forth ideas to deal with it will be political death to any candidate who brings it up. Most citizens still have their head in the sand and want to leave it there. We can only hope that some of our elected representatives have enough courage to face the challenge after the election. Sometime in the next 4 - 8 years they will have to.
AARP seems to be trying to at least look at some of the issues in the "Divided we fail" program although their solutions seem to be centered around social programs to help those who haven't helped themselves enough.
I suspect that the next 30 years will be the 1st time in American history where the combined standard of living will fall. By 2030 or 2040, the number of Americans who are retired and needing support from society should be back to a manageable size. There will need to be some serious decisions made about what is an acceptable level of social program support and how we can pay for them. There just isn't enough money in the US economy to support all the boomers at the level they have become accustomed to. | |
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