There is an unfunded-mandate (Social Security, Medicare, etc.) overhang on our federal government of $61.6 trillion (see Unfunded Federal Mandates). This is extremely bad news. However, I'm pretty sure that this is not the present value of this future debt. If one assumes that the average span of this obligation is 30 years and then apply a discount rate of 4.185% (the current interest rate on 30-year government bonds), then the discounted present value of this obligation is $18.03 trillion. Although this is not quite good news, it is a little closer to the rate of the United States' annual economic activity (now about $14.7 trillion). What could be good news for our government would be that, if the rate on our 30-year bonds were to increase to 8% (due to greatly increased inflation), then the present value of federal obligations would be a more manageable $6.12 trillion.
Of course, the bad news here is this almost $12 trillion difference would come right out of the hides of those to whom these mandates would be owed (mainly our children and grandchildren). And if you think that our government would not take this easy route (runaway inflation) out of this unfunded-mandate conundrum, then you are naive enough to vote for The Barry again.
One more piece of bad news, the above $61.6 trillion figure does not include the unfunded mandates of all our states and municipalities. UGH!
Afterthought: I think some wise-ass questioner in the Presidential debates in 2012 should ask the candidates what "discounted current value" is. I'm certain Romney and many of the other Republican hopefuls would know the answer. I somehow doubt if The Barry would.
2 comments:
Gee, you are smart. Too bad being smart doesn't prevent people from being wrong most of the time.
Does this mean that being dumb (like you know who ... or perhaps even that good looking lady from Alaska) means that you are most often right?
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