Why Our 16-Trillion-Dollar Debt Is Just the Tip of the Iceberg Ahead
In a prior post I pleaded with the GOP to put Paul Ryan on prime-time television to teach us and sound the alarm about our looming fiscal disaster. Former Congressmen Chris Cox and Bill Archer have just published an article in The Wall Street Journal that describes why the $16 Trillion debt that everyone talks about is just the tip of the iceberg.
They write (emphasis added):
A decade and a half ago, both of us served on President Clinton’s Bipartisan Commission on Entitlement and Tax Reform, the forerunner to President Obama’s recent National Commission on Fiscal Responsibility and Reform. In 1994 we predicted that, unless something was done to control runaway entitlement spending, Medicare and Social Security would eventually go bankrupt or confront severe benefit cuts.
Eighteen years later, nothing has been done. Why? The usual reason is that entitlement reform is the third rail of American politics. That explanation presupposes voter demand for entitlements at any cost, even if it means bankrupting the nation.
A better explanation is that the full extent of the problem has remained hidden from policy makers and the public because of less than transparent government financial statements. How else could responsible officials claim that Medicare and Social Security have the resources they need to fulfill their commitments for years to come?
So what is that “full extent”?
The actual liabilities of the federal government—including Social Security, Medicare, and federal employees’ future retirement benefits—already exceed $86.8 trillion, or 550% of GDP. 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.
Why haven’t Americans heard about the titanic $86.8 trillion liability from these programs? One reason: The actual figures do not appear in black and white on any balance sheet. But it is possible to discover them. Included in the annual Medicare Trustees’ report are separate actuarial estimates of the unfunded liability for Medicare Part A (the hospital portion), Part B (medical insurance) and Part D (prescription drug coverage).
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 eclipse the capacity of global capital markets—and bankrupt not only the programs themselves but the entire federal government.
The full scale of the liability, in an article where it is estimated to be over $100 Trillion, is illustrated at right with monster freight pallets of $100 bills that dwarf the old World Trade Center towers.
Does your Congressman or Senator know about all this? Has he or she told you? I know of one who has — my own Congressman, David Schweikert, Arizona District 6. He conducted more than a dozen town hall meetings about our budget and debt in 2011-2012. One of his presentations from the floor of Congress is available here. If you’re not sure about your own representative, why not forward him/her a link to this post and ask if he/she can confirm or correct the size of this problem? Is this issue important enough for you to do that?
Cox and Archer show that true total US liabilities are accruing at a stupifying pace of over $8 Trillion per year. Further, they show that under current laws, the total taxable income of all individuals and corporations is only $6.7 Trillion. Therefore,
… [even] if the government confiscated the entire adjusted gross income of … American taxpayers, plus all of the corporate taxable income in the year before the recession, it wouldn’t be nearly enough to fund the over $8 trillion per year in the growth of U.S. liabilities. Some public officials and pundits claim we can dig our way out through tax increases on upper-income earners, or even all taxpayers. In reality, that would amount to bailing out the Pacific Ocean with a teaspoon. Only by addressing these unsustainable spending commitments can the nation’s debt and deficit problems be solved.
You can read the full WSJ article here. You can see a clear and (somewhat) humorous illustration of the problem at this link. Despite the best efforts of Cox, Archer, Ryan, Schweikert, and many others to wake the public up to the situation, most people are still unaware. If they watch national news on TV, they are distracted by reports of the day-to-day squabbling over (relative) minutiae in Washington. Shame on our media (even Fox) for not hitting this theme again and again until it sinks in all across the country.
As of now, the default do-nothing plan is to pass this debt on to our children and grandchildren, selling them into a life of debt bondage that makes the feudal lords of the Middle Ages look like pikers. Of course, this is all being done without their knowledge, let alone permission, although the little fellow at right looks like he may have somehow gotten the word.
The best thing the GOP can do for the country is to bypass the usual media and talk directly to the American people — before it’s too late. The GOP may have lost out in the last election, but the party still has a bully pulpit, and unless forced, the Democrats will surely ignore this ultimate existential threat to our country’s future.