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With the launch of the MyGovCost iPhone app, it’s a good time to consider the trends in government spending that generated the concerns that motivated its creation, by looking at just three numbers:
Over the last 10 years, the total public debt outstanding of the U.S. federal government has increased by ten trillion dollars. As of April 10, 2014, the official national debt of the United States was $17,539,023,466,494.92, up more than $10 trillion from the $7,160,991,855,678.41 recorded ten years earlier on April 9, 2004.
By comparison, it had taken the U.S. federal government over 214 years to rack up 2004’s $7.16 trillion national debt level. Just under $7 trillion of the national debt added since 2004 has been added since President Obama was first sworn into office.
In 20 years, conservative estimates indicate that the expected growth in benefits paid to Social Security recipients will entirely deplete Social Security’s Old Age and Survivor’s Insurance Trust Fund. When that happens, the federal government will no longer have any legal obligation to sustain those benefit payments at their currently promised level.
To keep Social Security’s Trust Fund from running out of money as expected and keep going over the next 75 years, the federal government would have to adopt any one of these alternative reforms:
Without those actions, by current law, when Social Security’s trust fund runs out of money in 20 years, all benefits will be immediately and permanently slashed by 24% at that time.
Two Hundred Five
The total net present liabilities of the U.S. federal government are far greater than the $17.539 trillion national debt. The best estimates put them at a level about 12 times greater, at approximately $205 trillion. This value is based upon the Congressional Budget Office’s Alternative Fiscal Scenario, and represents the total current day dollar value of the difference between what the federal government is likely to spend in the future and what it is likely to collect in taxes.
Laurence Kotlikoff explains what that fiscal gap means if U.S. politicians acted today to deal with it:
The $205 trillion fiscal gap is enormous. It’s 10 percent of the present value of all future GDP. Equivalently, it corresponds to 10 percent of GDP year in and year out for as far as the eye can see. To raise 10 percent of GDP each year we could (a) raise all federal taxes, immediately and permanently, by 57 percent, (b) cut all federal spending, apart from interest on the debt, by 37 percent, immediately and permanently, or (c) do some combination of (a) and (b).
As you can see, the problems with closing the whole federal fiscal gap go far beyond what it would take to make Social Security solvent.