News Analysis
According to a U.S. Treasury report, the federal government has accumulated $142 trillion in debts, liabilities, and unfunded obligations, which equals 93 percent of all wealth accumulated by Americans since the nation’s founding, estimated at $152 trillion by the Federal Reserve.
Complete Versus Incomplete Accounting
Federal law requires the U.S. Treasury to publish an annual report detailing the government’s overall financial position, including explicit and implicit financial commitments.
The primary components of this burden include:
• $430,252 for every person in the U.S.
• $1,098,087 for every U.S. household.
• 2 times the annual U.S. GDP.
Publicly Held Debt
The Treasury report quantifies the publicly held debt at $26.3 trillion, representing the money owed by the federal government to non-federal entities.
Each household in the United States will need to contribute an average of $109,005 to pay for the present value of these benefits. The Treasury reports additional liabilities of the federal government, including $124 billion in accounts payable, $645 billion in environmental and disposal liabilities, and $99 billion in insurance and guarantee program liabilities. Altogether, the Treasury records $16.6 trillion in liabilities not included in the publicly held debt.
Social insurance programs like Social Security and Medicare operate on a pay-as-you-go basis, immediately spending the majority of taxes collected to pay benefits to current recipients. This has led to increased tax burdens on future generations, creating generational inequality. The unfunded obligations of Social Security and Medicare total $49.8 trillion and $53.9 trillion respectively, highlighting the financial burden passed on to future generations.
Despite taxpayers not having a contractual right to receive benefits from Social Security and Medicare, the federal government is committed to paying these benefits, as mandated by federal law. The Treasury report estimates the combined closed group unfunded obligations of these programs at $104.2 trillion.
Federal assets, including cash, property, and receivable loans, amount to $5.4 trillion. When the government’s debts, liabilities, and unfunded obligations are totaled and the value of its commercial assets subtracted, a fiscal shortfall of $142 trillion is revealed. The primary driver of the national debt is increased spending, particularly on social programs, which have grown from 21% of federal spending in 1960 to 64% in 2022. Despite this, only 39% of voters correctly identify social spending as the primary cause of rising debt. The publicly held debt is projected to soar to unprecedented levels over the coming decades, under the weight of these challenges.
Harmful Effects
A broad range of academic publications explain that excessive government debt can lead to various negative outcomes, including lower wages, increased inflation, weak economic growth, higher taxes, reduced government benefits, or a combination of these consequences.
Similarly, GAO warns that the costs of federal borrowing will impact tomorrow’s workers and taxpayers, potentially hindering the growth of future generations’ living standards.
While some argue that the U.S. government can freely spend and borrow because it can print money, it is essential to remember that there is no such thing as a free lunch in economics. As economist William A. McEachern points out, all goods and services come at a cost, and providing something for free still involves using scarce resources and expecting something in return.
Views expressed in this article are the opinions of the author and may not necessarily reflect the views of The Epoch Times. Please rewrite this sentence. Please rewrite this sentence.
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