America’s Debt? $455,000 Per Household
Yup. You heard right. The U.S. government is $53 trillion in debt, factoring in long-term liabilities. This translates to $455,000 per U.S. household. The San Francisco Chronicle’s Carolyn Lochhead wrote last Thursday:
As the Bush administration proposes backstopping mortgage giants Fannie Mae and Freddie Mac with a $300 billion line of credit and Congress contemplates another economic stimulus, the question is who will bail out the government?
“People seem to think the government has money,” said former U.S. Comptroller General David Walker. “The government doesn’t have any money.”
A rare consensus has developed across the political spectrum that the government’s own fiscal affairs are precarious, with an astonishing $53 trillion in long-term liabilities, according to the Government Accountability Office.
To put that number in human terms, the debt has reached $455,000 per U.S. household. As that debt grows, the United States increasingly relies on foreigners, including China and Middle East oil producers, for financing.
“The factors that contributed to our mortgage-based subprime crisis exist with regard to our federal government’s finances,” said Walker, now head of the Peter G. Peterson Foundation, a group established to raise alarms about the nation’s budget. “The difference is that the magnitude of the federal government’s financial situation is at least 25 times greater.”
According to Lochhead, the federal government’s finances are in worse shape than annual budgets show. This is due to the U.S. government not being required to state its long-term obligations. And the situation is about to become a crisis. She wrote:
This year’s presidential election coincides with the first retirements of the 78 million people born between 1946 and 1964. The first of this Baby Boom generation may now collect Social Security. In three years, they will join Medicare, the giant health care program whose finances are commonly described as out of control. Medicare accounts for the bulk of the nation’s long-term liabilities.
According to the Chronicle, current liabilities total $6.7 million for Social Security and $34.1 trillion for Medicare.
When will the financial meltdown occur? According to Kent Smetters, an economist at the Wharton School of Business at the University of Pennsylvania and a former Bush Treasury official:
I believe we could have a financial crisis like we’ve seen in South America or Asia. It could easily happen, and under current policy will happen in the United States. People say, “Gee, give me a date.” Obviously, that’s impossible, but the longer we wait, the higher the probability. Could it happen in the next decade? Absolutely.
In 1802, President Thomas Jefferson said to Treasury Secretary Albert Gallatin:
We might hope to see the finances of the Union as clear and intelligible as a merchant’s books, so that every member of Congress and every man of any mind in the Union should be able to comprehend them, to investigate abuses, and consequently to control them.
Is it just me, or are we doing a lot of things these days the Founding Fathers warned against?
Source:
“Concern grows over a fiscal crisis for U.S.”
Carolyn Lochhead
San Francisco Chronicle, July 17, 2008
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