Debt, Deficits, and Dumbfunded Liabilities

By James Schaefer.

  Few Americans are saving enough for retirement and other future needs, but the sorry truth is that individuals are more fiscally prudent — and solvent — than the governments and government agencies that serve them.  The problem can be described in terms of deficits, debt, and (worst of all!) unfunded liabilities.

A deficit is a shortfall within the current fiscal year; for example, we spent more in 2009 than we raised in taxes.  Each year those deficits add to the mountain debt of that has accumulated year after year, with just a handful of rare exceptions, in the last 40 years.  We’ve promised to pay all that money back, and we’ve also made promises of another kind.  Unfunded liabilities are the future costs of government programs and benefits that we are promising to voters today.

These liabilities are huge.  Early this year the Wall Street Journal stated that the estimated unfunded liability for Medicare was $37 trillion;  the latest estimate from Medicare’s chief actuary shows a far brighter picture, but he then attached a footnote saying that his report is an exercise in wishful thinking, based on congressional projections for cost savings that are “implausible”.

This is a crisis, and we are all in it together.  It’s important to distinguish between opinions and facts, to try to be objective, and to avoid singling out any political party or group.  We do not want to alienate anyone, for a simple reason: it is difficult to obtain detached reflection in the presence of an uplifted knife.

We need everyone in this together.  The goal is to address profligate spending, and to make the case that unsustainable debt, and unsustainable future liabilities, are just that — unsustainable.

Where do we go from  here?

As with any recovery, the first step is admitting that we have a problem.

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