Obama’s budget proposes to spend $3.73 trillion, and includes another $1.1 trillion deficit. Worse, even with the Obama administration’s optimistic projections, the national debt would increase by another $7.2 trillion over the next 10 years.
In fairness, I must point out that President-elect Obama did promise us “trillion-dollar deficits for years to come.” Who knew he meant it?
But I digress. Even without the additional $7 trillion plus in additional debt in Obama’s proposed budget, you won’t be able to believe how broke the federal government is.
According to Duquesne University Economics Professor Antony Davies, the debt and unfunded obligations of the federal government are greater than the “economic output of the entire planet.” That’s right, the entire planet.
Watch Professor Davies detail how much the federal government owes in the following video:
We do not have a good frame of reference to understand the concept of a trillion. Professor Davies shared the following analogy to provide a frame of reference we can understand.
If the Federal government were scaled down to the size of the average US household, here’s what its finances would look like:
- The Federal government would earn $50,000 a year in tax revenue (the same as the average US household).
- It would be $325,000 in debt.
- It would pay almost $10,000 a year in interest on that debt.
- Last year, it would have spent $79,000.
- This year, it is hoping to spend $86,000.
- The $100 billion in spending cuts (that some politicians view as draconian) would be equivalent to the household cutting its $86,000 in planned spending down to a mere $83,700. Not a bad start, but the household has another $33,700 to go before it balances its budget.
Take a closer look at Professor Davies’ chart:
- Germany’s GDP – $3.5 Trillion
- Intergovernmental Debt – $4.63 Trillion
- China’s GDP – $4.99 Trillion
- Japan’s GDP – $5.07 Trillion
- U.S. Debt Held by the Public – $9.46 Trillion
- U.S. GDP – $14.26 Trillion
- European Union GDP – $14.89 Trillion
- Unfunded Social Security Obligations – $15 Trillion
- Unfunded Medicare Obligations – $35 Trillion
- World GDP (excluding U.S.) – $43.97 Trillion
- World GDP – $58.23 Trillion
- Total Federal Debt and Unfunded Obligations – $64.09 Trillion
Professor Davies offers these notes of clarification: The numbers are approximate in that, due to data availability, individual numbers come from reports over the span 2009 through 2010. The unfunded obligations figures come from the Social Security and Medicare Board of Trustees report. “Unfunded obligation” is (all in present value terms), the sum of all anticipated future SS and Medicare payments minus all future SS and Medicare tax revenues minus the current balance in the SS and Medicare trust funds. In short, it’s an amount of money the government would have to have on hand, today and in addition to future SS and Medicare tax revenues, in order to meet its anticipated SS and Medicare obligations for current and future retirees.
It is way past time that we stop this spend too much, tax too much and borrow too much fiscal insanity.