I am not an alarmist, but do try to keep an eye on how the
Entitlement Crisis and Federal debit is doing.
Federal civilian
pensions
are now at $1.8 trillion per year. Military pensions are slightly less, at
$1.5 trillion. So the government spent $3.3 trillion
last year on pensions.
But it only collected $2.5 trillion of
tax revenue last year.
Our Federal pensions now exceed our Federal tax revenues by 32%!
No wonder the country is $16 trillion
in debt.
Of course, Social Security is also in
trouble.
(According to Larry Kotlikoff, the Federal government is spending
forty percent too much. I do not have the data to double-check his estimate. His math agrees
with everyone that Social Security is spending about twenty-three percent too much. That means there is no justified concern about Social Security disappearing--it might just need to
shrink its payments by about 23% starting in 2033.)
Simon Black
is an alarmist, but I was still curious when directed to some math from his recent
blog post.
US interest payments in Fiscal Year 2013 were a whopping $415 billion...
The IRS collected $2.49 trillion in taxes last year (net of refunds). But of this amount, $891 billion was from payroll tax.
According to FICA and the Social Security Act of 1935, however, this amount is tied directly to funding Social Security and Medicare. It is not to be used for interest payments.
Based on this data, the amount of tax revenue that the US government had available to pay for its operations was $1.599 trillion in FY2013.
This means they actually spent approximately 26% of their available tax revenue just to pay interest last year.
Hm. Let me look a bit more.
The 2013 interest expense was indeed
$416 billion.
Federal debt is now about
equal to the annual GDP. The last time I blogged about this ratio was in 2009 and it was only 74% then.
This article explains more. The Social Security trust funds are
required to hold Treasury bills, bonds, and notes. So it is not surprising that a lot of the Federal debt is held by the Social Security funds. The interest "payments" on debt held by the Social Security funds are
income for those funds. It is not bad debt, just awkward accounting.
In fact, about one-third of our Federal debt is owed to the two Social Security trust funds and the Federal Reserve. Only $223 billion of the $415 interest is paid as interest outside the Federal government itself.
That works out to 14% of the non-payroll-tax tax revenue, not the 26% that Simon Black calculated.
I have no idea how alarmed I should be at that 14%.
