Five Ugly Charts

2013 January 21
by SJ Leeds

Late Thursday, the “Citizen’s Guide to the 2012 Financial Report of the United States Government” was released.  As you can imagine, this is always an exciting time for me.


Actually, I think that a lot of the ideas and charts contained in this report are crucial.  Today, I want to share five slides with you.  Later this week, I will share four more that I found interesting.  Hopefully, it will give you a little something to think about.


Five Slides

1. We have huge unfunded liabilities.  Depending on how you measure it (closed group or open group), Social Security and Medicare are going to cost $38 trillion – $50 trillion more in the next 75 years than we’re going to take in from dedicated taxes.  (If you don’t know the difference in the closed group and open group, here’s a link where I discussed this in the past.) The underfunding ($38 trillion – $50 trillion) is measured in today’s dollars (i.e., that’s the present value). 

To give you context, we have $16 trillion of debt outstanding, only $12 trillion which is held by the public.  (The rest is held by “trust funds” such as the Social Security trust fund.) Think of it this way: if we had the proper amount of money today in order to satisfy the promises that we’ve made, we’d have another $38 trillion – $50 trillion of debt! In actuality, this is somewhat of an exaggeration because some of these programs were intended to be partially funded by general revenue (such as Medicare Parts B and D). But, it’s certainly fair to say that we’re $20 trillion underfunded (and that would more than double our debt level). See chart below.


9. summary of social insurance -- USE copy


2. If you don’t limit yourself to the next 75 years, but measure this unfunded liability for the infinite horizon, we’re $66 trillion underfunded.  See chart below.


8. infinite horizon -- USE copy



3. One underfunded liability that you rarely hear discussed is the liability for pensions to government employees (retirees) and veterans.  This is approximately $6 trillion.  See chart below.


4. gov't balance sheet -- USE copy


4. Our future deficits will grow over time.  Deficits will result in higher debt and that will lead to large interest payments.   Look at this chart and realize that most of what we spend is Social Security, Medicare, Medicaid and defense spending.  I constantly hear people say that we just have to cut “waste”, but alas, it’s not that easy.  See chart below.


5. where we're headed -- USE copy


5. Finally, look at how our debt is expected to explode.  Show this picture to your grandkids and tell them “sorry from Uncle Sandy.”


6. future debt -- USE copy


My sports comment for the day… I’ve heard a lot of people defend Lance Armstrong by citing Livestrong.  Well, Livestrong may be a great organization, but don’t forget that Lance attacked many innocent people and ruined many of them.  Here’s a great interview of Greg LeMond’s wife.  As a reminder, Greg LeMond is the only American to ever have won the Tour de France.

Have a great weekend.

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