Federal obligations NOW a record $546,668 per household

[snodog]

The latest increase raises federal obligations to a record $546,668 per household in 2008, according to the USA TODAY analysis. That's quadruple what the average U.S. household owes for all mortgages, car loans, credit cards and other debt combined.

Leap in U.S. debt hits taxpayers with 12% more red ink - USATODAY.com

Is this media sensationalism or are we really this bad off?

 

[ziggy29]

Media alarmism. According to the article, "(t)he government took on $6.8 trillion in new obligations in 2008, pushing the total owed to a record $63.8 trillion."

That may well be true. But the significant majority of this amount can be reasonably expected to be funded with ongoing tax revenues over the time span these liabilities come due. In other words, they are counting the projected "grand total" of all liabilities going decades into the future without offsetting it by expected future tax revenues to pay for them.

This is a VERY alarming trend that needs to be reversed. But I think resorting to sensationalist headlines that don't paint the full picture aren't doing anyone a service.

 

[crazy connie]

This may be deemed alarmist but that is ok by me. Americans need to see this and smell the coffee, it is time to wake up. This also does not factor in the % of households that have not, do not and will not (if they can avoid it) carry any real share of this burden. Isn't the figure now over 30% of the housholds pay taxes at a rate which is less than they recieve in direct subsidy? I am not speaking of retirees who have paid their dues.

 

[bsmup]

I'll give you alarmist, one word: default

Despite what Obama, Bernanke, Geitner and others would like you to believe, there is a point at which the buyers of US debt will say "no more". Instead of reigning in the current problems with the federal budget and the myriad social safety nets, they try to bluff their way out of this mess by buying and promising even more.

 

[Gone4Good]

I'll give you alarmist, one word: default

The lion's share (81%) of that ~60 trillion in "debt" is made up of future benefits, the payment of which are entirely discretionary. You don't default on discretionary expenditures (as in "I defaulted on my Starbuck's latte this morning").

We've "fixed" social security before by curtailing benefits, we'll do it again (raise the retirement age (again), reduce the COLA, etc, etc). These aren't "debts" in the traditional sense of the word. And when politicians inevitably renege on those promises, nobody will call it a default.

 

[bsmup]

The lion's share (81%) of that ~60 trillion in "debt" is made up of future benefits, the payment of which are entirely discretionary. You don't default on discretionary expenditures (as in "I defaulted on my Starbuck's latte this morning").

We've "fixed" social security before by curtailing benefits, we'll do it again (raise the retirement age (again), reduce the COLA, etc, etc). These aren't "debts" in the traditional sense of the word. And when politicians inevitably renege on those promises, nobody will call it a default.

The gov't will default when their ability to fund their debt runs out. The way this comes about is:

1) buyers of gov't debt will require higher rates of interst due to reckless budget spending and the purchase of anything the banks/car makers/insurers etc can unload onto uncle sam

2) tax receipts plummet as individuals lose their jobs and corporations lose money because, well, the consumer is losing his job

3) as the government's interest rates rise while its ability to pay interest declines it will have to sell all those wonderful "assets" it "purchased" from the banks and everyone else that it intended to sell when things improved all in order to come up with additional funds.

4) default as politicians prove to be incapable of DRASTICALLY cutting off funding to all different programs.

 

[samclem]

The gov't will default when their ability to fund their debt runs out.

Why would the government default when they can just introduce more money (devaluing the currency, sure) and pay off everyone who is owed (retirees, bondholders, govt employees) with the new money? It wouldn't be called a default at all--everyone got the exact number of dollars they were owed. It's just that each dollar is worth less (or "worthless").
Inflation is the tax that is the least painful to politicians because it is indirect. It's the traditional way insolvent countries handle these things.

 

[snodog]

That may well be true. But the significant majority of this amount can be reasonably expected to be funded with ongoing tax revenues over the time span these liabilities come due. In other words, they are counting the projected "grand total" of all liabilities going decades into the future without offsetting it by expected future tax revenues to pay for them.

So this is like saying that a newborn is 10 million dollars in debt by adding up all their expenses from birth till the grave.

 

[atlas888]

Buying votes can be expensive, but it is easy when you are using some other people's money to do so.

 

[Gone4Good]

Why would the government default when they can just introduce more money.

Yup. Not possible to default when all your obligations are denominated in a currency of your own design.

Of course, at some point, lenders will require you to borrow money in THEIR currency. At that point you know you're up the creek.

 

[ziggy29]

So this is like saying that a newborn is 10 million dollars in debt by adding up all their expenses from birth till the grave.

Not really because (a) the debt doesn't exist yet (it's just projected to exist but can be changed by legislation) and (b) whatever they owe will be a function of their lifetime income, most likely.

 

[MichaelB]

Counting future obligations without counting future income is cheating.

Counting current debts but not counting current assets (valuable assets like land and natural resources) is bad math.

Only looking at federal debt and not including state and local is dumb.

The US has a problem of too much debt - federal, local, personal. It will never get the serious attention is deserves as long as it is treated this way by the media morons.