The place to start is with a report put out annually by the U.S. Treasury. There I learned that the federal government officially recognizes an outstanding debt of $17.5 trillion. This amount consists of $10.2 trillion in government debt held by the public, plus pension and retirement benefits owed to federal employees.
On the one hand, that amount exceeds our country’s entire gross domestic product and that’s pretty bad. On the other hand I was surprised that the number wasn’t even higher because… Hey wait a minute.
What about Social Security? It’s not on the list. What about Medicare? It’s not there either.
On further investigation, I found out why. “Social Security promises are part of current law and can be changed by Congress at any time,” I was told. Ditto for Medicare. And disability insurance. And survivors insurance. Etc. Etc. That’s a bureaucratic way of saying, “We can break those promises any time we want to.”
So let’s see if I’ve got this right. I’ve been paying Social Security taxes for some 45 years or so and the federal government doesn’t officially admit that it owes me a dime. The same is true for 45 years of Medicare taxes. But it does admit that it owes pension benefits and post-retirement medical benefits to federal workers. As a taxpayer, I’m liable for all the promises the government has made to its own employees. But federal workers are not liable (necessarily) for all the promises the government has made to me.
If you are a bond holder or a federal employee the federal government is saying, “We owe you the money.” But if you’re a senior on Medicare or Social Security, the government’s position is, “We can default on our promises to you anytime things get a bit tight.”
What’s wrong with this picture?
Still, the government isn’t likely to abolish Social Security and Medicare anytime soon. In fact, it’s unlikely to ever abolish them. So what happens to the “amount we owe” if we throw those promises into the picture along with everything else? The calculations have been made in a study for the National Center for Policy Analysis by former Social Security/Medicare Trustee Thomas R. Saving and economist Andrew J. Rettenmaier. Here’s what they found:
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