Wednesday, June 30, 2010

$71 trillion National Debt?

I have been reading ShadowStats analysis of the Federal Government 2009 Balance Sheet using GAAP accounting, and the author, John Williams, thinks that the total debt should be shown as $70.7 trillion. His numbers come from the following: 1) total liabilities of the fed. gov. of $14,123B as of 9/30/09; 2) "closed group" of Social Security participants present value of $52,145B; and 3) total intragovernmental debt of $4,391B; totalling $70,659B. (By the way, the "open group" present value total, which also includes future participants is only $45,878B because future participants will pay more in taxes than they will get back as benefits).

What I want to know is why they show unfunded SS liabilities of $52T when the Social Security Trustees show unfunded liabilities of only $5.3T. Part of the difference is that the "closed group" number shown above includes Medicare, but that is still an enormous disparity.

One guess is that the total present value of Social Security only is -$7,677B. Of this, $2,296B is "funded" with Treasury bonds, leaving $5,381B unfunded, which is close enough to the $5.3T number.

Even the $71 trillion does not include liabilities from the Federal Reserve or Fannie Mae/Freddie Mac. I'm going to have to think about this, but it appears that I will need to recalculate again what I am now calling the "expanded national debt".

Edit: I think the Total Federal Obligations column from the report is inaccurate because it includes both the closed group total and intragovernmental debt. Some of the intragovernmental debt is dedicated to paying Social Security obligations, so including both is double counting. So a better number is probably "GAAP Fed. Negative Net Worth", which is the total net position from the balance sheet, plus "closed group" unfunded liabilities. This figure is as follows:

Year NNW Change
=== ==== =====
2009 $63.6 $4.3
2008 $59.3 $5.0
2007 $54.3

The next steps would be to figure out when this becomes unsustainable, and to project out to that point.

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