The Hidden Social Security Debt
August 5, 2014
The United States takes in taxes to pay for programs such as Social Security, promising seniors benefits upon retirement. But as Senior Fellow Larry Kotlikoff explains, those promises are not officially recorded as debts, meaning that the federal government has a hefty set of financial obligations that are kept off the books.
The Social Security program has a $24.9 trillion unfunded obligation. In all, total government indebtedness was $210 trillion in 2013, a figure that Kotlikoff terms the "fiscal gap" -- a measurement of the difference between projected obligations and projected tax revenue and other government receipts. According to Kotlikoff:
- Eliminating the fiscal gap would require the federal government to increase its tax revenues by 59 percent immediately or cut its spending by 38 percent.
- If the government waits two decades before acting to deal with this issue, it would have to raise tax revenue by 70 percent or cut spending by 43 percent.
In 2013, four senators introduced the Inform Act, a bill that would have required three government agencies -- the Congressional Budget Office, the Government Accountability Office and the Office of Management and Budget -- to use generational accounting when analyzing proposals. Generational accounting measures debts across generations and indicates that the United States' fiscal situation is in even worse shape than it appears.
Source: Laurence Kotlikoff, "America's Hidden Credit Card Bill," New York Times, July 31, 2014.
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