One hundred thousand dollars per second

On November 21st 2024 the US federal debt crossed the 36 trillion dollar threshold.

US Treasury debt to the penny

The debt crossed 35 trillion dollars on July 26th, 2024.

7/26/2024 $35,001,278,179,208.67

11/21/2024 $36,034,994,586,981.97

In 118 days the Federal Government added $1,033,716,407,773.30 (over one trillion dollars) to the national debt. Over this time period the national debt increased at a rate of  $8,760,308,540.45 per day (almost $9 billion per day),  $365,012,855.85 per hour, $6,083,547.60 per minute, or  $101,392.46 per second.

You can watch the increase in debt occur in real time (fun for the whole family)  at:

US Debt Clock

As you are well aware the larger the outstanding balance the larger the interest payment. Interest on the national debt is now larger than defense spending:

The details of this happy story are available at this link:

Looming debt crisis

Another interesting publication is available from the US Treasury:

Financial Report of the USA

Look for these word of encouragement on Page 7 of the Executive Summary:

An Unsustainable Fiscal Path 

The current fiscal path is unsustainable. To determine if current fiscal policy is sustainable, the projections based on the assumptions discussed in the Financial Report assume current policy will continue indefinitely.1The projections are therefore neither forecasts nor predictions. Nevertheless, the projections demonstrate that policy changes need to be enacted for the actual financial outcomes to differ from those projected.

On page 9 of the Executive Summary you will find this:

Conclusion

Projections in the Financial Report indicate that the government’s debt-to-GDP ratio is projected to rise over the 75-year projection period and beyond if current policy is kept in place. The projections in this Financial Report show that current policy is not sustainable.

The USA is not the first empire to find itself in this situation:

Empire Killer

On January 20th, 2025 Donald Trump will earn his self chosen nickname:

The King of Debt

Incomprehensible liabilities

A recent conversation about the US Federal Government's unfunded liabilities caused me to reexamine a statistic that I absorbed several years ago.  Boston University economics professor Laurence Kotlikoff stated that the US Federal Government's unfunded liabilities exceed 200 trillion dollars.  This number is quoted many times, and in many places, but I was not able to find any published details that provide the calculations that establish this number.

During my research, I found that there is a publication by the US Treasury each year titled “Financial Report of the United States Government” which provides financial statements for the Federal Government in a format like an annual report for a public corporation.  When reading this report, it is important to note that some of the amounts are listed in trillions and some in billions.  Also, note that trillions and billions are sometimes commingled in the same table or chart.

I am not accustomed to working with numbers this large and I was having trouble keeping the decimal places straight, so I created a chart:

The interesting details of the “Financial Report of the United States Government” are in the notes.  You will find a frank opinion in Note 24 on page 157 (pdf page 166) under the heading:

Sustainability and the Fiscal Gap

“This report presents data, including debt, as a percent of GDP to help readers assess whether current fiscal policy is sustainable. The debt-to-GDP ratio reached 100 percent at the end of FY 2020” ….  “As discussed further in the unaudited RSI, the projections based on this report’s assumptions indicate that current policy is not sustainable. If current policy is left unchanged, the projections show the debt-to-GDP ratio will rise to 200 percent by 2042 and reach 623 percent in 2095. Moreover, if the trends that underlie the 75-year projections were to continue, the debt to-GDP ratio would continue to rise beyond the 75-year window.”

https://www.justfacts.com/nationaldebt#_ftn26

If you are not a fan of tables and charts you can read the highlight of the “Financial Report of the United States Government” in plain English and in 1 sentence on page ii (pdf page 9):

An Unsustainable Fiscal Path

 

“The continuous rise of the debt-to-GDP ratio projections based on the assumptions in this Financial Report indicates that current policy is not sustainable.”

A recent report from Truth in Accounting titled Financial State of the Union 2020 calculates the Federal Government's unfunded liabilities as $123.11 trillion ($123,110,000,000,000).

Also, there is the US debt clock website that displays a real-time calculation of US Unfunded Liabilities.  This calculation is the sum of unfunded liabilities in Social Security, Medicare Part A, B, and D, Federal Debt held by the public, Federal Employee Benefits, and Veteran Benefits.  The total at the time of writing this blog post is $147.684 trillion ($147,684,000,000,000).  Note that this number is increasing by 12 million dollars every minute so when you visit the US Debt Clock webpage the number will be larger.

 The current estimate of US GDP from the Bureau of Economic Analysis is $22.05 trillion.  Therefore, if total unfunded liabilities (UL) are $147.684 trillion then the UL to GDP ratio is 670%.  This means that if the total economic production of the USA were dedicated to paying down the unfunded liabilities it would take 6.7 years to achieve 100% funding.

The current estimate of world GDP is $30.191.   Therefore, if US total unfunded liabilities are $147.684 trillion then the UL to world GDP ratio is 490%.  This means that if the total production of the world were dedicated to paying down the US unfunded liabilities it would take 4.9 years to achieve 100% funding.

The current population of the USA is 330,246,485.  Therefore, if US total unfunded liabilities are $147.684 trillion then the total UL per person living in the USA is $447,193.  You might be inclined to think that such a level of unfunded liabilities for each man, woman and child is not possible, but if the Federal Government continues deficit spending and continues to increase future obligations, there is no upper limit to how high this number can go until there is a complete collapse of the monetary system.

Since the financial crisis of 2008 interest rates have been lower than historical averages.  If (when) interest rates rise to historical averages the increase in US total unfunded liabilities will accelerate due to larger interest payments on the outstanding national debt.

I could not find proof that supports 220 trillion dollars as the US total unfunded liabilities.  Based on the sources listed above, I am confident that the Federal Government's unfunded liabilities are rapidly approaching $150 trillion.

Please use the comment button below to provide questions, comments, or clarifications on this topic.

A Federal Deficit Space Jump

I checked the math (because I live for that sort of thing) and these number are correct.  To pay for 1 year of our Federal Budget deficit in $100.00 bills, the stack of bills would be 746.5 miles tall!

Let the buyer beware

The Securities and Exchange Commission recently settled a fraud claim against the State of New Jersey.  The details are in this Bloomberg News article:

http://www.bloomberg.com/news/2010-08-18/new-jersey-settles-sec-claims-of-misleading-bond-investors-on-pension-fund.html

Here are the highlights:

New Jersey settled claims that it misled investors in $26 billion of municipal bonds by masking underfunding of its two biggest pension plans, in the first Securities and Exchange Commission case to target a state.

Documents for 79 bond offerings from 2001 to 2007 “created the false impression” that the Teachers’ Pension and Annuity Fund and the Public Employees’ Retirement System were adequately funded, hiding that the state couldn’t make contributions without raising taxes or cutting services, the SEC said in a statement today.

The suit marks the first time the SEC has sued a state for violating federal securities laws and marks an early salvo in the agency’s plan to crack down on fraudulent practices in the $2.8 trillion municipal bond market.

State and local governments all across America have substantial unfunded pension liabilities. Can bond holders now file claims against these bond issuers due to misrepresentation of their pension liabilities? If so this could be a bonanza for trial attorneys.

Our obsession with debt

I have often wondered why the United States Government encourages debt and consumption rather than savings and investment. The following article by Robert P. Murphy of the Mises Institute explores the basis of this paradox:

http://mises.org/daily/4631

The following 2 quotations that are referenced in the above article drive home Robert Murphy’s point:

Marriner Eccles was the Governor of the Federal Reserve System in 1941. On September 30 of that year, Eccles was asked to give testimony before the House Committee on Banking and Currency. The purpose of the hearing was to obtain information regarding the role of the Federal Reserve in creating conditions that led to the depression of the 1930s. Congressman Wright Patman, who was Chairman of that committee, asked how the Federal Reserve got the money to purchase two billion dollars worth of government bonds in 1933. This is the exchange that followed.


ECCLES: We created it.

PATMAN: Out of what?

ECCLES: Out of the right to issue credit money.

PATMAN: And there is nothing behind it, is there, except our government's credit?

ECCLES: That is what our money system is. If there were no debts in our money system, there wouldn't be any money.

Robert Hemphill, Credit Manager of the Federal Reserve Bank in Atlanta, wrote in 1936, "If all the bank loans were paid, no one could have a bank deposit, and there would not be a dollar of coin or currency in circulation. This is a staggering thought. We are completely dependent on the commercial banks. Someone has to borrow every dollar we have in circulation, cash, or credit. If the banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money system. When one gets a complete grasp of the picture, the tragic absurdity of our hopeless situation is almost incredible — but there it is."

Downsizing the Federal Government

The Federal Government is consuming a larger share of gross domestic product each year. Those who wish to study Federal spending may find it difficult to adequately research this subject. Thankfully the Cato Institute has codified the statistics and provided a website with a plan to downsize the Federal Government.

http://www.downsizinggovernment.org/

Cato describes the purpose of this website as follows:

The federal government is running massive budget deficits, spending too much, and heading toward a financial crisis. Without a change of direction in Washington, average working families will be faced with huge tax increases and a lower standard of living.

Some people have lofty visions about how government spending can help society. But the essays on this website put aside such “bedtime stories” about how government programs are supposed to work, and instead focuses on how they actually work in the real world.

Downsizing the Federal Government is a project of the Cato Institute. Scholars at Cato believe that cutting the federal budget would enlarge personal freedom, increase growth and prosperity, and leave a positive fiscal legacy to the next generation.

Help Me, Uncle Sam

This Barrons article discusses the next phase of our governmental meltdown:

http://online.barrons.com/article/SB123941269948510457.html

If States and Municipalities are allowed to borrow from the US Government or have the US Government guarantee their debt there will be no fiscal accountably left at any level of government.