Wednesday, September 01, 2010

You owe $355,415

I just finished watching the movie "I.O.U.S.A." about America's addiction to debt, both privately and as a public policy to fund our overspending. It was a very balanced documentary mostly featuring former Comptroller General David Walker and it took shots at all political parties for what was called a "deficit of leadership" to match our actual deficits.

The main thing I took away from the film is that it reinforced my special obsession with the U.S. debt: the structural gap between entitlement promises and our ability to pay for them. Social Security has an unfunded liability of $14.5 trillion, the Prescription Drug Plan has a liability of $19.2 trillion, and the granddaddy Medicare has an unfunded liability of $76.4 trillion. In other words, we need over $110 trillion right now (or $355,415 per American) to pay for all this stuff and we currently have zip. Meanwhile, foreign countries are gobbling up U.S. T-bills, raising the specter of economic warfare in much the same way the United States pressured England and France during the Suez Canal crisis.

Anyway, it was a very good, eye-opening, and scary movie. But they weren't above a little humor: in the closing credits, they played Nick Lowe's "Cruel to be Kind" as a reminder that a little pain right now will help America avoid a calamitous fiscal reckoning in the future.

3 comments:

Ida May Fuller said...

Social Security has an unfunded liability of $14.5 trillion

This too-frequently-cited number covers the entirety of the future (dubbed "infinite horizon"). It is dismissed by the AAA national actuaries guild as being misleading, and not useful.

Over the next 75 years, the liability is $3.7 trillion, not 14.5. The estimated taxable payroll between now and 2085 is more than $300 trillion.

Eric said...

Well, a trillion here, a trillion there, and pretty soon you're talking about real money.

The SS Trustees have said that benefits will need to be cut 25% in 2037. The gap between promised benefits and actual benefits cannot be breached. As a minimum, can we tell Americans the truth?

Ida May Fuller said...

Well, a trillion here, a trillion there, and pretty soon you're talking about real money.

Sure, but 75 years isn't "pretty soon." The program's entire existence has been 75 years.