“Official” national debt as of 2015 is currently reported at more than $18 trillion. That means that under Barack Obama and with the aid of the private Federal Reserve, U.S. debt has nearly doubled since 2008 — quite an accomplishment in only seven years’ time. But this is not the whole picture.
Official GDP numbers published for mainstream consumption do NOT include annual liabilities generated by programs such as Social Security and Medicare. These liabilities are veiled through the efforts of the Congressional Budget Office (CBO), which reports on what it calls “debts” rather than on the true fiscal gap. Through the efforts of economists like Laurence Kotlikoff of Boston University, Alan J. Auerbach and Jagadeesh Gokhale, understanding of the fiscal gap (the difference between our government’s projected financial obligations and the present value of all projected future tax and other receipts) is slowly growing within more mainstream circles.
The debt created through the fiscal gap increases, for example, because of the Social Security program - since government taxes the population for Social Security but uses that tax money to fund other programs or to pay off other outstanding debts. In other words, the government collects "taxes" with the promise of paying them back in the future through Social Security, but it spends that money instead of saving it for the use it was supposedly intended.
The costs of such unfunded liabilities within programs like Social Security and Medicare accumulate as the government continues to kick the can down the road instead of changing policy to cover costs. This accumulation is reflected in the Alternative Financial Scenario analysis, which the CBO used to publish every year but for some reason stopped publishing in 2013. Here is a presentation on the AFS by the St. Louis branch of the Federal Reserve. Take note that the crowd laughs at the prospect of the government continuing to “can kick” economic policy changes in order to avoid handling current debt obligations, yet that is exactly what has happened over the past several years.
Using the AFS report, Kotlikoff and other more honest economists estimate real U.S. national debt to stand at about $205 trillion.
When the exposure of these numbers began to take hold in the mainstream, media pundits and establishment propagandists set in motion a campaign to spin public perception, claiming that the vast majority of this debt was actually “projected debt” to be paid over the course of 70 years or more and, thus, not important in terms of today’s debt concerns. While some estimates of national debt include future projections of unfunded liabilities in certain sectors this far ahead, the spin masters' fundamental argument is in fact a disingenuous redirection of the facts.
According to the calculations of economists, unfunded liabilities are adding about $8 trillion in total debt annually. That is $8 trillion dollars per year not accounted for in official national debt stats. For the year ending Dec. 31, 2011, the annual accrued expense of Medicare and Social Security was $7 trillion of this amount.
This annual hidden debt accumulation has resulted in a current total of $205 trillion. This amount is not the unfunded liabilities added up in all future years. This is the present value of the unfunded liabilities, discounted to today. How is the U.S. currently covering such massive obligations on top of the already counted existing budget costs? It’s not.
Taxes collected yearly in the range of $3.7 trillion are nowhere near enough to cover the amount, and no amount of future taxes would make a dent either. This is why the Grace Commission, established during the Ronald Reagan presidency, found that not a single penny of your taxes collected by the Internal Revenue Service is going toward the funding of actual government programs. In fact, all new taxes are being used to pay off the ever increasing interest on current debts.
For those who argue that an increase in taxation is the cure, more than 102 million people are unemployed within the U.S. today. According to the Bureau of Labor Statistics and the Current Population Survey (CPS), 148 million are employed; about 20% of these are considered part-time workers (about 30 million people). Around 16 million full time workers are employed by state and local government (meaning they are a drain on the system whether they know it or not). Only 43 percent of all U.S. households are considered “middle class,” the section of the public where most taxes are derived. In the best-case scenario, we have about 120 million people paying a majority of taxes toward U.S. debt obligations, while nearly as many are adding to those debt obligations through welfare programs or have the potential to add to those obligations in the near future if they do not find work due to the high unemployment rate that no one at the BLS wants to acknowledge.
Looking at reality, one finds a swiftly shrinking middle class paying for an ever larger welfare class. Do the math, and an honest person will admit that no matter how much taxes increase, they will still never make up for the lack of adequate taxpayers.
Another dishonest argument given to dismiss concerns of the national debt is the lie that Domestic Net Worth in the U.S. far outweighs our debts owed, and this somehow negates the issue. Domestic Net Worth is calculated using Gross Domestic Assets, public and private. It's interesting, however, that Domestic Net Worth counts 'Debt Capital' as an asset, just as GDP counts debt creation as production. Debt Capital is the “capital” businesses and governments raise by taking out loans. This capital (debt) is then counted as an asset toward Domestic Net Worth.
Yes, that’s right, private and national debts are “assets.” And mainstream economists argue that these debts (errr… assets) offset our existing debts. This is the unicorn, Neverland, Care Bear magic of establishment economics, folks. It’s truly a magnificent thing to behold.
Ironically, debt capital, like the official national debt, does not include unfunded liabilities. If it did, mainstream talking heads could claim an even vaster supply of “assets” (debts) that offset our liabilities.
This situation is clearly unsustainable. The only people who seem to argue that it is sustainable are disinformation agents with something to gain (government favors and pay) and government cronies with something to lose (public trust and their positions of petty authority).
With overall Treasury investments static for some foreign central banks and dwindling in others, the only other options are to print indefinitely and at ever greater levels, or to default. For decades, the Federal Reserve has been printing in order to keep the game afloat, and the American public has little to no idea how much fiat and debt the private institution has conjured in the process. Certainly, the amount of debt we see just in annual unfunded liabilities helps to explain why the dollar has lost 97 percent of its purchasing power since the Fed was established. Covering that much debt in the short term requires a constant flow of fiat, digital and paper. Not only does REAL debt threaten our credit standing as a nation, it also threatens the value and full faith in the dollar.
The small glimpse into Fed operations we received during the limited TARP audit was enough to warrant serious concern, as a full audit would likely result in the exposure of total debt fraud, the immediate abandonment of U.S. Treasury investment, and the destruction of the dollar. Of course, all of that will eventually happen anyway.
No society or culture has ever successfully survived by disengaging itself from its own financial responsibilities and dumping them on future generations without falling from historical grace. Not one. Does anyone with any sense really believe that the U.S. is somehow immune to this reality?
No comments:
Post a Comment