USA's Hidden Debt

USA Today (5/19/08): The federal government's long-term financial obligations grew by $2.5 trillion last year, a reflection of the mushrooming cost of Medicare and Social Security benefits as more baby boomers reach retirement. That's double the red ink of a year earlier. Taxpayers are on the hook for a record $57.3 trillion in federal liabilities to cover the lifetime benefits of everyone eligible for Medicare, Social Security and other government programs, a USA TODAY analysis found. That's nearly $500,000 per household. When obligations of state and local governments are added, the total rises to $61.7 trillion, or $531,472 per household. That is more than four times what Americans owe in personal debt such as mortgages. The $2.5 trillion in federal liabilities dwarfs the $162 billion the government officially announced as last year's deficit, down from $248 billion a year earlier.

"We're running deficits in the trillions of dollars, not the hundreds of billions of dollars we're being told," says Sheila Weinberg, chief executive of the Institute for Truth in Accounting of Chicago. The reason for the discrepancy: Accounting standards require corporations and state governments to count new financial obligations, even if the payments will be made later. The federal government doesn't follow that rule. Instead of counting lifetime benefits for programs such as Social Security, the government counts the cost of benefits for the current year. The deteriorating condition of these programs doesn't show up in the government's bottom line, but the information is released elsewhere — in Medicare's annual report, for example. Since 2004, USA TODAY has collected the information to provide taxpayers with a financial report similar to what a corporation would give shareholders. Big new liabilities taken on in 2007:

• Medicare: $1.2 trillion.

• Social Security: $900 billion.

• Civil servant retirement: $106 billion.

• Veteran benefits: $34 billion.

• JJ Commentary: With the baby boomers now beginning to hit early retirement age, this humongous debt load will continue to expand at an accelerated rate. And now, with tax revenues down due to the recession, the situation has become critical, perhaps near the tipping point.