How Big is The Federal Government's Debt?
June 26, 2002
By the most common definition -- the total of all outstanding bonds held by the public -- at the end of 2001 the federal government debt stood at $3.3 trillion, or $11,657 for each American. However, this ignores accumulated obligations to pay Medicare and Social Security benefits to the baby boom generation and other current program participants.
These implicit commitments dwarf the public debt:
- As of 2001, the accumulated obligations to all people (including all current workers) who have earned Social Security and Medicare benefits is $12.9 trillion for Social Security and $16.9 trillion for Medicare. [See Figure I.]
- Combined with the debt held by the public, the total burden equals $33.1 trillion, or 10 times the official debt measure.
- This "total debt" is more than three times the size of the nation's total output in 2001, and amounts to $116,381 for every man, woman and child in America.
How will these obligations be paid? Today the payroll tax rate for Social Security retirement and disability insurance is 12.4 percent.
- By the year 2030, the government will need 16.4 percent of workers' incomes to pay Social Security benefits.
- Add Medicare Part A and the government's share of Medicare Part B, and the burden will climb to 24 percent.
- When today's 19-year-olds reach normal retirement age in 2050, their children and grandchildren will face a payroll tax of 17 percent to pay Social Security benefits.
Include Medicare Part A and B and the payroll tax will have to be 28 percent.
Source: Andrew J. Rettenmaier (NCPA senior fellow), "How Big Is the Government's Debt?" Brief Analysis No. 402, June 21, 2002, NCPA.
Browse more articles on Tax and Spending Issues