Contact us
CALL US NOW 1-888-GOLD-160
(1-888-465-3160)

US Government Debt Problem Even Worse Than Advertised

  by    0   0

Through the first six months of fiscal 2021, the US government ran a record $1.7 trillion budget deficit. And there is no end in sight to the borrowing and spending. Just last month, the national debt eclipsed $28 trillion for the first time. But it’s even worse than that.

A lot worse.

When you include unfunded liabilities such as Social Security and Medicare, that actual US debt stands at $123.11 trillion, according to the Financial State of the Union 2021 published by Truth in Accounting.

In order to pay off all of Uncle Sam’s liabilities, every taxpayer in the US would have to write a check for $796,000.

I don’t know about you, but I don’t have it.

The federal government has $5.95 trillion in assets and $129.06 trillion in liabilities. If it were a private company, the US government would be bankrupt.

Here’s a breakdown of Uncle Sam’s liabilities in broad categories.

  • Medicare benefits – $55.12 trillion
  • Social Security obligations – $41.2 trillion
  • Publicly held debt – $21.08 trillion.
  • Military and civilian retirement benefits $9.41 trillion
  • Other liabilities – $2.25 trillion

According to Truth in Accounting’s analysis, the US government’s financial situation has deteriorated over the last year. Based on the latest available audited financial reports, its financial condition worsened by $9.84 trillion in 2020.

Interestingly, the Treasury Department only includes $175.30 billion of Social Security and Medicare liabilities on the federal balance sheet; according to government documents, recipients do not have the right to benefits beyond the benefits currently being paid and laws to reduce or stop future benefits can be passed at any time. Truth in Accounting assumes no changes in the current Social Security or Medicare schemes. This is a pretty safe assumption considering these programs are generally considered the “third rail” of politics. In other words, politicians dare not touch them.

Truth in Accounting’s conclusion feels a lot like an understatement.

Because the federal government would need such a vast amount of money from taxpayers to cover this debt, it received an “F” grade for its financial condition.”

Can we go with an F-?

The only thing that keeps the federal government solvent is the fact that the Federal Reserve backstops the bond market and monetizing the debt. The central bank buys US Treasuries on the open market with money created out of thin air (debt monetization). This creates artificial demand for bonds and keeps interest rates low. All of this new money gets injected into the economy, driving inflation higher. We see this playing out before our eyes as the Fed continues to expand the money supply by record amounts.

Last week, Jerome Powell acknowledged that the federal budget is on an “unsustainable trajectory.” But he insists that the current debt load is sustainable. “There’s no question of our ability to service and issue that debt for the foreseeable future,” Powell said.

Of course, that’s only true as long as the Fed keeps monetizing. And that could become problematic if inflation runs out of control. The only way to battle inflation is to tighten monetary policy. And the only way to feed the ravenous federal budget monster is to keep monetary policy loose.

What will Powell choose?

Of one thing we can be certain — the US government won’t suddenly stop spending money.

There is always an excuse to borrow and spend more. Today, it’s the economic emergency caused by the coronavirus. And when times are good, the politicians will tell us it’s time to “invest in our future.” There is never a time to “prioritize concern” about the budget deficits and paying down the national debt. It’s always “kick the can down the road,” as Powell is recommending now. That works fine – until you run out of road.

That road is looking mighty short.

Gold IRA Rollover to 401k

Get Peter Schiff’s key gold headlines in your inbox every week – click here – for a free subscription to his exclusive weekly email updates.
Interested in learning how to buy gold and buy silver?
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!

Related Posts

Another Month, Another Huge Budget Deficit

The US government ran another huge budget deficit in April. The shortfall came in at $225.58 billion, running the total budget deficit through the first seven months of fiscal 2021 to a record $1.9 trillion, according to the Treasury Department’s Monthly Treasury Statement. That compares with a $1.5 trillion deficit through the first seven months […]

READ MORE →

Gold Demand in the Tech Sector Up in Q1

Gold demand in the technology sector was up 11% year-on-year, coming in at 81.2 tons in the first quarter of 2021. According to the World Gold Council, the strong growth was partially due to comparison with relatively weak tech demand in the first quarter of 2020, as governments began shutting down economies in response to […]

READ MORE →

Job Openings Hit Record High as Unemployment Persists

America’s labor market is a mess and riddled with incongruency. On the one hand, businesses can’t find workers. Help wanted signs hang in windows across the country. A McDonald’s franchisee in Tampa is offering bonuses just for showing up for an interview. Meanwhile, unemployment just ticked up to 6.1%. In what kind of world does […]

READ MORE →

Jim Grant: The Fed Can’t Control Inflation

Federal Reserve Chairman Jerome Powell insists inflation is “transitory.” As prices have spiked throughout the economy, Powell’s messaging has essentially been, “Move along. Nothing to see here.” Peter Schiff has been saying the central bankers at the Fed can’t actually tell the truth about inflation because even if they acknowledge it’s a problem (and it […]

READ MORE →

America’s Trade Surplus in Services Shrinks as Trade Deficit in Goods Balloons

Americans consume goods other people produce. As America offshored its manufacturing, it promised to supply the world with high-priced services and technology in exchange. But as it turns out, that promise never materialized. The ballooning overall trade deficit bears this out. It leaped to another record high in March, surging 5.6% month-on-month to a new […]

READ MORE →

About The Author

Michael Maharrey is the managing editor of the SchiffGold blog, and the host of the Friday Gold Wrap Podcast and It's Your Dime interview series.
View all posts by

Comments are closed.

Call Now