The real national debt is far worse than you think, critics say
The 75-year unfunded liability for total social insurance liabilities in the federal financial statement are pegged at $30.9 trillion in 2010 and $33.8 trillion in 2011 — both a huge drop from 2009, when the burden stood at $45.9 trillion. Why the sudden drop?
The reason, Steinberg said, is that “The Affordable Care Act is assuming there will be tremendous savings in Medicare costs,” savings won through “productivity gains” and by slashing doctors’ fees.
But many experts doubt either of these savings will materialize, and among the skeptics are Medicare’s own actuaries and the external auditors. “The numbers through 2009 got an unqualified opinion from the auditors,” Steinberg said. “In 2010 and 2011, the auditors had to qualify their opinion, because the actuaries said that they did not think those cost projections would necessarily hold up.”
A letter from Medicare actuaries in May 2011 said, “In our view, the scheduled physician payment reduction is implausible and there is a strong likelihood that the productivity adjustments will not be sustainable in the long range.”
Medicare and Social Security obligations are not included alongside veterans and employee benefits in national debt figures, Steinberg said, because FASAB has determined that Social Security and Medicare are not binding commitments.
“Current law says that when the Social Security trust fund runs out of money, which would be in the year 2033, they are prohibited by law to continue to make payments of the full amount," Steinberg said. "They can only make payments to the extent that they have contributions coming in."
“There is no exchange transaction here,” Steinberg said, as when an employee works in exchange for guaranteed benefits. In essence, Social Security is a government benefit that can be changed at any time. And because there is no contract to break, there is no accounting liability.
“When the (FASAB) board was looking at the best way to report this,” Steinberg said, “the feeling was not to put this on the balance sheet as a liability. It really wasn’t a liability.”
Perhaps equally to the point, he added, “The number would end up being so large that no one would be able to relate to it.” For both reasons, Steinberg said, FASAB chose to separate the social insurance liabilities in a separate location in the report.
Weinberg at the Institute for Truth in Accounting said she could live with scoring Medicare and Social Security off the books, but only if policy leaders made it clear there is no commitment.
She gets her hackles up when policymakers try to have it both ways, treating these programs as sacred promises for political gain — but hiding the cost in the books.
Weinberg said the no-promises-day-to-day approach would work if a few criteria were met. Payroll taxes should be treated as a “tax,” she said, not a “contribution.” Politicians and government officials must stop referring to “trust funds” and “guarantees.” If they do, she wants it legally treated as fraud. Personalized annual Social Security statements must no longer be mailed to taxpayers. Finally, Weinberg wants a serious education campaign undertaken to correct the record in taxpayers’ minds.
Weinberg is not holding her breath. “Politicians aren’t stupid,” she said. “They do these books on a cash basis because they don’t want to increase the deficit but they want to get re-elected.”
Eric Schulzke writes on national politics for the Deseret News. He can be contacted at email@example.com.
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