By the end of this year, two meaningless, but symbolically important numbers will approach a 1:1 ratio: they are the outstanding federal debt and the nominal GDP. As an Austrian, I feel the GDP is pretty silly, but the fact remains: There is no way for this nation to ever meet all of its obligations!
Let us consider the off-balance sheet estimates of future social security and medicare payments, the largest federal spending items (followed by our Adventures in the Orient). The Medicare Hospital Insurance fund is already “in the red” and drawing on general revenues (see table). Please don’t be confused when you hear reports that the “trust funds” will run out a few years down the road. THERE ARE NO TRUST FUNDS! They exist as liabilities of the Treasury to the trust funds – debt the government owes itself and on which it pays interest (to itself). All revenues from these programs were consolidated with the general fund and already spent in the years received! Since the system is built like a big Ponzi scheme, with current retirees drawing on those who pay into the system, the gap between future revenues and liabilities will grow as our population ages. Social Security actually consists of several trust funds, the largest of which, Federal Old-Age and Survivors Insurance Trust Fund, will become a net burden on Treasury THIS YEAR. Don’t believe me? Look at those numbers by the Congressional Budget Office. If you subtract “interest” and other “income” that comes directly from the Treasury (see footnote “a/”) into the cesspool, err, trust fund, you will see that benefits are projected to exceed revenues in 2010.
Revenues (from taxes) 657
(Ignore money transferred from Treasury)
Total Outgo (includes Railroad and administrative costs) 703
As you can see from the above numbers, current Social Security revenue doesn’t cover expenses. So what are the total future SS and Medicare obligations of this nation-state? Somewhere around 60 Trillion dollars. This sum will never be paid out. We will default on these retirement benefits and all the money paid into so-called “trust funds” is already gone forever. Want to see what happens when a nation goes bankrupt? Why don’t you read up on the collapse of the Soviet Union, or the default in Argentina and then tell me why a Rasmussen poll shows Ron “Real Hard Money” Paul in a dead heat with Barack “Monetize trillions to bail out failed companies and murder foreigners” Obama.