Any American who’s paying attention knows we’re headed for a fiscal cliff, but $600 billion isn’t even close to how deep the federal fiscal hole really is, according to the Wall Street Journal. That’s because the U.S. Treasury “balance sheet” omits Medicare, Social Security, and other unfunded liabilities:
As a result, fiscal policy discussions generally focus on current-year budget deficits, the accumulated national debt, and the relationships between these two items and gross domestic product. We most often hear about the alarming $15.96 trillion national debt (more than 100% of GDP), and the 2012 budget deficit of $1.1 trillion (6.97% of GDP). As dangerous as those numbers are, they do not begin to tell the story of the federal government's true liabilities.
Hold on to your hats—or your wallets, as the case may be. What’s really owed once you dispense with government accounting gimmicks is $87 trillion—yes, TRILLION.
The actual liabilities of the federal government—including Social Security, Medicare, and federal employees' future retirement benefits—already exceed $86.8 trillion, or 550% of GDP. For the year ending Dec. 31, 2011, the annual accrued expense of Medicare and Social Security was $7 trillion. Nothing like that figure is used in calculating the deficit. In reality, the reported budget deficit is less than one-fifth of the more accurate figure.
Why haven't Americans heard about the titanic $86.8 trillion liability from these programs? One reason: The actual figures do not appear in black and white on any balance sheet.
All the king’s horses and all the king’s tax men won’t be able to put this rotten egg back together again.
The combined gross income of every American earning more than $66,193 amounts to $5.1 trillion. Pre-recession income of American businesses had combined taxable income of $1.6 trillion. Together, that’s $6.7 trillion. Even if the IRS could extract all that from taxpayers—we’re still be in the hole.
In short, if the government confiscated the entire adjusted gross income of these American taxpayers, plus all of the corporate taxable income in the year before the recession, it wouldn't be nearly enough to fund the over $8 trillion per year in the growth of U.S. liabilities. Some public officials and pundits claim we can dig our way out through tax increases on upper-income earners, or even all taxpayers. In reality, that would amount to bailing out the Pacific Ocean with a teaspoon.
It’s time hard-working Americans demand the same fiscal restraint of our government that we demand of ourselves.