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Does the U.S. debt really stand at 200 trillion $?

  1. Aug 29, 2010 #1
    Yeah, I was wondering where the 200 trillion $ figure comes from.
  2. jcsd
  3. Aug 30, 2010 #2
    $13 trillion is what I believed to be the national debt.
  4. Aug 30, 2010 #3
    I believe you are referencing government "unfunded liabilities" - these are promises by the government to pay some estimated amount in the future, that have not been directly funded by tax revenues today.

    To give you an example, a parent promising to buy their child a car when that child graduates high school would be an "unfunded liability", until the parent sets aside the $30,000 purchase price (now we'd call it a "funded liability").

    People usually quote the unfunded entitlement liability as between $50 and $100 trillion, over the infinite term. The practical consequences are as impossible to predict as the infinite term unfunded liability numbers themselves. In reality, it is clear that the money currently set aside for Social Security and Medicare programs is sufficient to cover current expenses, but obviously insufficient to cover future expenses if we assume a positive rate of change in program costs. But money is fungible - there is no reason we cannot simply set aside more money for these programs tomorrow, switching an "unfunded liability" to a "funded" one. As a function of GDP, there is no question that the US economy can more than afford to cover the promises made by the US government. If we treat the entire economy as "funding" for the government, then these entitlement programs are indeed funded over any conceivable term.

    To return to the parent example, even if we consider the car an "unfunded liability" today, there is no question that they could afford to keep their promise, given an annual household income of $45,000 (approximately median income). The question is not can they afford it, but how big a chunk of their income will they have to devote to making the payments.

    National debt is the US governments current obligations to its creditors, and is approximately $13 trillion. It need not be repaid; in practice the government simply rolls the debt over by issuing new bonds when those existing reach maturity. Only the interest needs to be paid for the government to be "solvent", and we are nowhere near the point where it cannot afford to make the interest payments.
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