US funding for future promises lags by trillions
Tuesday, June 07, 2011
U.S. funding for future promises lags by trillions
By: Dennis Cauchon, USA TODAY
The federal government's financial condition deteriorated
rapidly last year, far beyond the $1.5 trillion in new debt taken
on to finance the budget deficit, a USA TODAY analysis shows.
The government added $5.3 trillion in new financial obligations
in 2010, largely for retirement programs such as Medicare and
Social Security. That brings to a record $61.6 trillion the total
of financial promises not paid for.
This gap between spending commitments and revenue last year
equals more than one-third of the nation's gross domestic
product.
Medicare alone took on $1.8 trillion in new liabilities, more
than the record deficit prompting heated debate between Congress
and the White House over lifting the debt ceiling.
Social Security added $1.4 trillion in obligations, partly
reflecting longer life expectancies. Federal and military
retirement programs added more to the financial hole, too.
Corporations would be required to count these new liabilities
when they are taken on - and report a big loss to shareholders.
Unlike businesses, however, Congress postpones recording spending
commitments until it writes a check.
The $61.6 trillion in unfunded obligations amounts to $534,000
per household. That's more than five times what Americans have
borrowed for everything else - mortgages, car loans and other debt.
It reflects the challenge as the number of retirees soars over the
next 20 years and seniors try to collect on those spending
promises.
"The (federal) debt only tells us what the government owes to
the public. It doesn't take into account what's owed to seniors,
veterans and retired employees," says accountant Sheila Weinberg,
founder of the Institute for Truth in Accounting, a Chicago-based
group that advocates better financial reporting. "Without accurate
accounting, we can't make good decisions."
Michael Lind, policy director at the liberal New America
Foundation's economic growth program, says there is no near-term
crisis for federal retirement programs and that economic growth
will make these programs more affordable.
"The false claim that Social Security and Medicare are about to
bankrupt the United States has been repeated for decades by
conservatives and libertarians who pretend that their ideological
opposition to these successful and cost-effective programs is based
on worries about the deficit," he says.
USA TODAY has calculated federal finances based on standard
accounting rules since 2004 using data from the Medicare and Social
Security annual reports and the little-known audited financial
report of the federal government.
The government has promised pension and health benefits worth
more than $700,000 per retired civil servant. The pension fund's
key asset: federal IOUs.