Unfunded liabilities

There’s some serious concern about this $16 trillion national debt, but some say the reported debt is only a relatively small part of the government’s future commitments. N.C. State University economist Mike Walden explains.

“Well …, this is a concept called unfunded liabilities. And essentially what economists do is they look into the future and they see what kind of commitments for spending the federal government has made and promised to pay, particularly in the areas of Social Security, Medicare and Medicaid. They then take projections for tax revenues into the future and then they look at the difference. And what they have found is that there’s a tremendous gap.

“Indeed what has recently been calculated is that this gap amounts to not $16 trillion, which is the amount of borrowing the federal government has done to date, but it amounts to $200 trillion.

“In other words, this is the amount of money that the federal government has promised to pay in the future and which they do not have projected tax revenues for. And obviously that’s a very, very big number. And it’s a very, very scary number. And it says that something will have to give.

“Now what many economists think is that this is a different kind of debt because although the federal government has promised to pay it now, in the future Congress can change the rules. And, indeed, that’s the current thought — that we’re not going to face a bill for $200 trillion in the future. That is, that as time gets closer and that amount becomes more apparent, Congress will have to change the rules for again programs like Social Security, Medicare and Medicaid that will significantly reduce that unfunded liability number.”