An old statute requires the Treasury to issue an annual financial statement, similar to a corporation’s annual report. The FY 2016 edition is 274 enlightening pages that the government hopes none of us will read.
Among the many tidbits, it contains a table on page 63 that reveals the net present value of the US government’s 75-year future liability for Social Security and Medicare.
That amount exceeds the net present value of the tax revenue designated to pay those benefits by $46.7 trillion. Yes, trillions.
Where will this $46.7 trillion come from? We don’t know.
And the above is from a 2017 article. Likely much worse now.
Oh wait Here is 2024 article.
Analyst Warns Social Security, Medicare Underfunded By $175.3 Trillion
The revelation, detailed in the Financial Report of the United States Government, casts a long shadow over the nation’s fiscal future, with Treasury Secretary Janet Yellen stating that America’s current policies are “not sustainable and must ultimately change.”
tj [old codger] yelling Social Security & Medicare is my RIGHT!
Sure. Only as long as the federal government says I am eligible for benefits.
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Ok, but what is the value of govt’s promise to pay? Bond rating says less than excellent but very good.
The U.S. has lots of assets it can use if required. Balanced budget and no deficit spending is better but there are alternatives when the chips are down.
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In 7 years the unfunded liability for Social Security & Medicare has more than tripled.
And the trend of US national debt to GDP is on the decline.
IMO the government’s promise to pay has a low value.
- The government will pay its obligations by issuing debt.
- Like any other commodity, government debt price responds to supply and demand. If supply (debt) grows faster than demand (investors willingness to lend) prices will plunge and interest rates will rise.
- The Federal Reserve can buy government debt to suppress interest rates. This happened during the 2008 and Covid financial crises. Also in 2012 - 2014 when there wasn’t a specific crisis in the U.S.
The result of the Fed buying debt (suppressing interest rates) was that real rates were the lowest in history and negative at times. A boom in the asset markets (stocks, bonds, real estate) resulted so nobody complained.
- If the money going into consumer hands grows faster than the supply of consumer goods and services inflation will result.
- It isn’t necessary for the government to cut people off the benefit rolls. They can simply tax the benefits more. (50% of Social Security benefits are already taxed at 85% for high income recipients. It would be easy to tax 100% of Social Security and/ or tax Medicare benefits received.)
Wendy
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Wendy, the value of your fed chart total assets is $7 trillion. The unfunded liabilities in 2024 was $175.3 trillion. If that figure continues at the same rate the unfunded liabilities will be $658 trillion. That gives me pause in the federal government ability to fund such amounts.
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@tjscott0 this blows my mind. The government can send out payments but that way lies hyperinflation.
Wendy
Our government continues to ignore the debt problem.
I can live without my Social Security but not my Medicare.
I do not have children and am 74. So hopefully hyperinflation will past my expiration date.
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At the same time, those $175 trillion are accumulated over 75 years, i.e., until the end of the century.
DB2
Does anyone think every private insurance company in the US has the money stashed away, to pay in full, every claim on every policy? Think about it. Every one of the roughly 150M life insurance policies hit, every car with collision is totalled, every car liability max is hit, every insured building burns down. Anyone think the insurance companies have that much squirreled away?
Steve
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No. That would be roughly equivalent to an asteroid hitting the earth. Game over.
We have just been through this with the sale of unused govt buildings. Can also apply to much federal land–wildlife preserves, national forests, even national parks. Drilling rights on public lands. Mineral rights. etc, etc.
Many of these would be painful and receive much political opposition. But if its a choice between some of these and cutting Social Security, I suspect compromises will be made.
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