U.S.' financial condition
A review of the latest available audited financial reports indicates that the U.S. government’s overall financial condition worsened by almost $10 trillion in 2020. The official government debt figure of more than $28 trillion does not include the short- and long- term economic impact of state shutdowns in 2020 nor the amount the federal government owes in unfunded Social Security and Medicare benefits. This assumes no change in current Social Security or Medicare programs. The result is a true debt burden of more than $123 trillion or a little less than $800,000 per household.
Those numbers should frighten our elected officials in the U.S. Congress, but they seem to be totally oblivious to it. President Joe Biden in his first 100 days now has proposed $6 trillion in new spending programs, and the planned reduction in corporate income tax is touted as the primary answer to “paying” for the planned $2 trillion-plus infrastructure bill. However, 80% of the government’s revenues ($4 trillion in 2021) come from individual income and withholding taxes, while corporate taxes account for only 9%. So, the math just doesn’t add up.
While some state and local governments have rainy day funds or cash reserves, the federal government’s answer is to print and borrow more money, or to raise taxes. The forgotten element of this equation is to reduce expenses, which generally is not considered. The current government spending programs are not sustainable in the long run. While interest rates currently are low, we can’t expect that forever; and in the background lurks the prospect of higher inflation, which is a game changer. Remember, practically no one saw the Great Recession of 2007-09 coming. Let’s hope and pray the debt bubble doesn’t burst, and that the experts aren’t wrong again.