This is not some right-wing or alarmist hype.  This is simple basic accounting. (I was a CPA.)  The sources are the Trustee Reports.

Just look at the simplified example and you'll "get" a new understanding of what is actually occurring.

                                                   Deficit         Debt

    Cash accounting                       $1.4 tr        $16 tr
    Actual accounting                     $5.0 tr       $100 tr

    Per taxpayer (217 million)         $23,000    $460,000 (= extra to be paid at some time = tax increase)


Cash Accounting Vs. Actual Accounting

Let's pretend we're a company.

Sell                                    $50 million
Cost, what I spend directly,  $48million
   Net profit                         $2 million

No, federal government requires you to address all costs of current production.  While you are not paying this expense in cash, you must recognize the cost, as it affects the value of the company.  (Companies are required to currently fund at least a portion of that into a segregated pension plan; the federal government doesn't require that for itself - you have no money set aside for your Social Security and Medicare - all the cash revenue has been spent in current spending.)

It seems the company has promised pension benefits to be paid out at retirement in the future.  The "actuaries" compute that the cost of those benefits in the future would be $4 million, for which you'd have to put away $3 million to grow at 4% per year in order to meet future obligations. 
This causes the following:

         Net "cash" profit                                          $2 trillion
         Minus: Cost of liability for the future               $3 trillion
             Actual profit (a loss!)                     Minus $1 trillion  (Loss)


If we account for what we actually spend in cash and then add the obligations we are incurring every year to pay out future benefits.

Budgeted "today" spending in federal government, 2013;       $3.8 trillion
Expected revenues                                                              2.4 trillion
    Cash accounting deficit                                                  1.4 trillion
Cost presently of liabilities for Medicare & Social Security      3.6 trillion

    Total actual deficit                                                        $5.0 trillion

What do you think that would do to taxes, at some point?  Will it magically disappear, somehow?


If the government were forced to use company "actual accounting", our total debt would be:

Lent to the government                         $16 trillion
Unfunded liabilities:
     Social Security                              $15 - 17 trillion
     Medicare                                       $90 - 100 trillion  (A, $36.4 tr;  B, $35 tr; D, $18 tr    
  Total liabilities unpaid for                    $121 trillion


The federal government decided not to account for unfunded liabilities at all.

It was assumed that the revenue paid in by current workers would pay for all those who are retired.  In 1950 there were 16.5 workers to cover 1 social security beneficiary;  1980, 3.2; 2010, 2.9; 2030, 2.2.  (SSA.gov)

In 2010, the amount of payouts exceeded the pay-ins for social security.  There will be $600 billion in social security deficits over the next decade - and it will increase even more every year under the present system. Of course, the number of workers at the current payroll tax is insufficient to cover the retirees.


$20.5 trillion Social Security unfunded liabilities, have to increase payroll taxes from current 12.4% to 16.2% to be in balance.  The 2011 Trustees Reports: Same Song, Second Verse
    Tops $25 trillion - Another Trustee Report 
Sources:  The Future Financial Status of the Social Security Program, Stephen C. Goss, Chief Actuary of the Social Security Administration


I used to teach the idea of the present value of future benefits to intermediate accounting students.  So, I can see the misunderstanding and confusion in the following statement:

There is no unfunded debt

"But no government obligation can be truly considered "unfunded" because of the U.S. government's sovereign power to tax--which is the ultimate resource to meet its obligations."

Yes, of course, the taxpayers will fund the obligations, but that is not the problem.  The problem is will they be able to afford paying the extra taxes!!!!!!?  The idea of unfunded is that the liable party (the government and thus the taxpayers) has to cover the future liabilities in some way - and that way is, of course, taxes - which will reduce the standard of living for future generations. 

The USA doesn't owe these

Technically, these are not "liabilities" some experts argue.  "The Supreme Court has ruled that the U.S.A. does not have a contractual obligation to pay Social Security and Medicare under rules that Congress has no power to change," Burtless said in an email. "No citizen can expect to win a lawsuit that demands that benefits be paid that are as generous as the benefits that were ‘promised’ under some old, presumably more generous set of rules."  

But don't you think that the USA should pay what it promises, even though it could get out of it, like anybody who owes a debt?

The efficiencies projected in ObamaCare reduce the costs

Lots of "ifs" in assuming costs will be reduced.

"The 2009 trustee reports for Medicare projects a $36.6 trillion unfunded liability for the next 75 year period and $86.5 trillion if it goes further out. Yet it states that the projection UNDERSTATES the problem because it is based on doctors' payments in the current law, which the trustees feel are unreasonable."  (Answers. believe those who are qualified and understand "compounding" as a concept, for without that the numbers are meaningless.)

By the Numbers: 2011 Medicare Trustees Report

Wednesday, June 22, 2011

By The Numbers: 2011 Medicare Trustees Report

Today’s hearing on the 2011 Medicare Trustees report reinforces what has long been widely acknowledged:  Action must be taken to prevent Medicare from reaching its rapidly approaching insolvency and collapsing.

•The trustees currently predict the Medicare Hospital Insurance (HI) trust fund will go bankrupt in 2024, five years earlier than they estimated in last year’s report. 

•Medicare’s unfunded liabilities total $24.6 trillion under the current law baseline.

•If Congress does what the trustees expect and reverses cuts called for by the Democrats’ health care law and prevents cuts to Medicare physician payment rates, Medicare spending will grow from 3.6 percent of Gross Domestic Product (GDP) in 2010 to roughly 10.7 percent of GDP in 2085.

•The long-range financial imbalance of the HI trust fund could be addressed by immediately increasing the payroll tax by 24 percent or,

•By an immediate 17 percent cut in expenditures (by reducing benefits or cutting provider payments).

The Medicare Trustees say Medicare's financial woes are understated and action must be taken sooner, rather than later.  Congress and the Obama Administration must work together to ensure that Medicare will continue to serve America’s seniors for generations to come.

You choose how to balance the beneifts and costs:  

Simplified Example Of Solving Underfunding 

Are there enough "rich" to pay for the other people? 

Billing the rich the maximum would lower the economic growth for all citizens. 


The 81% Tax Increase - To cover liabilities, beyond current payroll taxes, income taxes would have to rise 81%.