Have you ever wondered how much we as taxpayers actually owe because of commitments politicians have made on our behalf? Turns out, the answer is not as simple as you might think.
The place to start is with a report put out annually by the U.S. Treasury. There I learned that the federal government officially recognizes an outstanding debt of $17.5 trillion. This amount consists of $10.2 trillion in government debt held by the public, plus pension and retirement benefits owed to federal employees.
On the one hand, that amount exceeds our countrys entire gross domestic product and thats pretty bad. On the other hand I was surprised that the number wasnt even higher because... Hey wait a minute.
What about Social Security? Its not on the list. What about Medicare? Its not there either.
On further investigation, I found out why. Social Security promises are part of current law and can be changed by Congress at any time, I was told. Ditto for Medicare. And disability insurance. And survivors insurance. Etc. Etc. Thats a bureaucratic way of saying, We can break those promises any time we want to.
So lets see if Ive got this right. Ive been paying Social Security taxes for some 45 years or so and the federal government doesnt officially admit that it owes me a dime. The same is true for 45 years of Medicare taxes. But it does admit that it owes pension benefits and post-retirement medical benefits to federal workers. As a taxpayer, Im liable for all the promises the government has made to its own employees. But federal workers are not liable (necessarily) for all the promises the government has made to me.
If you are a bond holder or a federal employee the federal government is saying, We owe you the money. But if youre a senior on Medicare or Social Security, the governments position is, We can default on our promises to you anytime things get a bit tight.
Whats wrong with this picture?
Still, the government isnt likely to abolish Social Security and Medicare anytime soon. In fact, its unlikely to ever abolish them. So what happens to the amount we owe if we throw those promises into the picture along with everything else? The calculations have been made in a study for the National Center for Policy Analysis by former Social Security/Medicare Trustee Thomas R. Saving and economist Andrew J. Rettenmaier. Heres what they found:
If todays seniors get everything thats been promised to them, they can expect to receive $12.8 trillion in Social Security and Medicare benefits beyond the estimated taxes and premiums that will be collected to fund those programs.
If these promises to the elderly are counted as official obligations, federal liabilities would climb to $30.3 trillion about twice the size of our entire economy.
If we also include promises being made to all the young people who are currently paying (FICA) payroll taxes, the total climbs to nearly $84 trillion.
Bottom line: we taxpayers owe a great deal. In fact, we owe about five-and-a-half times what the government officially admits.