Two days ago, the gross federal debt of the United States of America surpassed $16,000,000,000,000. That’s sixteen trillion dollars. This historic landmark in reckless spending neatly coincided with the beginning of the Democratic National Convention in Charlotte, North Carolina.
Make no mistake: Both parties definitely bear some blame for this fiscal catastrophe, and I’ve gone in-depth on that subject before. President Obama’s administration has presided over a $5.4 trillion surge in the debt, but the primary blame for debt-creation must go to Congress. As I pointed out in that article, the president does not control government spending. It’s certainly true that President Obama has failed to provide the nation with leadership on the matter of the deficit and debt, but I won’t pretend that he alone is to blame.
Why am I picking on the Democrats for the timing of their convention, then? Simply put, they’ve decided to outright ignore our mounting debt. They’ll briefly allude to it here and there in an effort to sound more moderate, but the Democratic Party appears content to ignore the debt while labeling Republicans as hypocrites on the issue of deficit spending.
I’ll concede that several of the most prominent national Republicans are hypocrites regarding debt creation, particularly after President George W. Bush’s time in office. However, I would argue that the Republican Party as a whole has undergone a fundamental transformation since 2008. The rise of the Tea Party movement led to a “hostile takeover” of the Party by fiscal conservatives. Sure, both parties share the blame for creating our massive national debt, but only one party has called for true fiscal restraint to stave off the coming debt crisis.
By the way, you’ll hear from pundits and columnists that the national debt isn’t really $16 trillion. Distinguishing between the gross federal debt ($16.0 trillion) and the federal debt held by the public ($11.2 trillion), they’ll claim that the problem isn’t that bad, and that conservatives are overreacting. While I consider the notion that more than $11 trillion in debt is acceptable absolutely ridiculous, I’ll grant that the argument has some (limited) merit.
The gross federal debt consists of the debt held by the public and “intra-governmental” debt. In other words, a debt that the government owes to itself. How does the federal government owe itself money? Well, Congress has acquired the nasty habit of borrowing from the Social Security Trust Fund and other federal pensions plans. They use the money to purchase securities from the Department of the Treasury, thereby paying for other government programs.
Over the years, this irresponsible borrowing has totaled up to nearly five trillion dollars, which has put Social Security in a significantly worse position today than it would be otherwise. While it’s true that the government could forgive the intra-governmental debt to itself, that wouldn’t be some kind of magical solution to the debt crisis. The nominal gross federal debt would be lower, but we would still owe more than $11 trillion dollars.
More to the point, this borrowing from the Social Security trust fund should remind us of an even larger problem: unfunded liabilities. A June report from the National Center for Policy Analysis stated that the federal government owed a mind-boggling $84 trillion in unfunded liabilities to various entitlement programs such as Social Security and Medicare. Mind you, that was last year’s numbers, and they considered that figure a “conservative estimate.”
To be fair, our unfunded liabilities are somewhat different from our public debt. After all, Congress could pass a reform law today dramatically changing Social Security or Medicare, and that would have an enormous impact on our unfunded liabilities. In this way, they’re more unfunded promises than set-in-stone liabilities. Still, with the Democratic Party opposing any serious reform to our major entitlement programs, it may be a long time before we can reduce our unfunded liabilities to a sustainable level.
Together, the national debt (whether gross or public) paired with our unfunded liabilities threaten to destroy our government’s finances and the American economy. Tuesday’s debt milestone should serve as a wake-up call for us all.