On the current state of America’s public finances…

Today, on the day after the election, US federal government debt stands at $16.2 trillion. Putting this into perspective, US federal government debt stood at $5.7 trillion on the day that George W. Bush was first inaugurated (January 20, 2001), and grew by $4.9 trillion (to $10.6 trillion) by the time of Barack Obama’s inauguration on January 20, 2009. Three years and 10 months later, US federal government debt has grown by an additional $5.6 trillion (you can verify these numbers by using the “Debt to the Penny” app located on the treasury.gov website (see http://www.treasurydirect.gov/NP/BPDLogin?application=np)).

As bad as the US federal government debt problem is, we have a far worse entitlement problem which hardly anyone is bothering to talk about these days; indeed, I don’t recall any substantive discussion about this topic during the past several months leading up to yesterday’s election. According to an authoritative source located at http://www.pgpf.org/Special-Topics/Download-the-Citizens-Guide.aspx (see Figure 10 on page 30 of that document), in January 2009 the present value of Social Security and Medicare promises stood at $45.8 trillion; $7.7 trillion of this total was due to Social Security, and the remaining $38.1 trillion was attributable to Medicare. According to the recently published (April 2012) Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds, the present value of unfunded Social Security obligations now stands at $8.6 trillion, which represents an 11.7% increase over the January 2009 amount. Since I haven’t been able to locate a current estimate of the present value of unfunded Medicare promises, I’ll assume for the time being that the present value of unfunded Medicare promises has also grown 11.7% since January 2009. Thus, the January 2012 present value of Social Security and Medicare promises probably now stands at or around $45.8 trillion x 1.117 = $51.2 trillion. (If anyone knows of an authoritative, up-to-date source for the present value of Medicare promises, please let me know! :-)).

This means that as a country, total indebtedness due to claims on the federal government stands at roughly $16.2 trillion plus $51.2 trillion, or $67.4 trillion. Since there are (according to the US Census Bureau) 117,538,000 households in America, if you do the arithmetic this works out to a per household debt of (gulp) $573,432. If you throw in unfunded liabilities from state employee pensions (estimated by Stanford University finance professor Joshua Rauh to total roughly $4 trillion; cf. http://www.econtalk.org/archives/2012/11/joshua_rauh_on.html), this works out to an additional $34,031 for a total of $607,463 per US household. Since the average net worth per US household is roughly $80,000 (see http://money.cnn.com/2012/06/11/news/economy/fed-family-net-worth), this means that the average American household effectively has a (negative) net worth in excess of half of a million dollars…

Assorted Links (11/2/2012)

Here’s a list of articles that I have been reading lately:

Taxpayer Deluge


“National flood insurance may be the next bailout, says The Wall Street Journal editorial page.”

Hurricanes and Human Choice


“In The Wall Street Journal, the University of Colorado’s Roger Pielke Jr. writes that Sandy was terrible, but we’re currently in a relative hurricane ‘drought’—and connecting energy policy to disasters makes little scientific sense.”

A Parable of Health-Care Rationing


“In The Wall Street Journal, Anne Jolis writes that Europeans come to the U.S. for front-line cancer therapy now—but where will they go after ObamaCare?”

How Far Obama Has Fallen


Peggy Noonan follows the president’s path from historic figure to beleaguered incumbent in less than four years.

Hurricane Sandy: Recovery


Hurricane Sandy: Recovery – Great photo-essay by the good folks at the Boston Globe…

The Grumpy Economist: Debate with Goolsbee


Economic Debate: U of C professors John Cochrane (Romney advisor) and Austan Goolsbee (former Obama Chairman of the Council of Economic Advisors)

“On behalf of NPR and all other news outlets, we apologize to Abigael and all the many others who probably feel like her,” NPR’s Mark Memmott writes.

Tired of Bronco Bamma and Mitt Romney

“This is four year old Abigael after hearing one too many mentions of the election.”

Faith, Economics, & Liberation Theology


“What is Liberation Theology and what does it mean for the church? Read on to find out more about faith, economics, and liberation theology.”

How do Gallup’s likely voter models work?


“Turnout in typical presidential elections is related to a voter’s current interest in the election, self-reported intention to vote, and previous history of voting.”

With all of the polling data out there, it’s helpful to understand what a “likely” voter actually looks like – this Gallup article (source: http://www.gallup.com/poll/111268/How-Gallups-likely-voter-models-work.aspx) notes that their definition of a likely voter has the following characteristics:

1. Thought given to election (quite a lot, some)
2. Know where people in neighborhood go to vote (yes)
3. Voted in election precinct before (yes)
4. How often vote (always, nearly always)
5. Plan to vote in 2012 election (yes)
6. Likelihood of voting on a 10-point scale (7-10)
7. Voted in last presidential election (yes)

The Fiscal Cliff and a Grand Bargain: What Are They and What Are the Prospects?


The answer to this question will largely determine whether the US economy sinks back into recession at the beginning of 2013. The non-partisan Congressional Budget Office (whose job it is to advise Congress on the economic ramifications of their policies) estimates that a recession is inevitable if Congress and the administration remain in a stalemate over this matter…

Obama Supporters Confronted with President’s Record on Surveillance, Detention, Kill Lists


“It’s different when the guy you like does it.”

The choice


Quoting from this essay by the Washington Post’s Charles Krauthammer: “Government grows in size and power as the individual shrinks into dependency. Until the tipping point where dependency becomes the new norm — as it is in Europe, where even minor retrenchment of the entitlement state has led to despair and, for the more energetic, rioting. An Obama second term means that the movement toward European-style social democracy continues, in part by legislation, in part by executive decree. The American experiment — the more individualistic, energetic, innovative, risk-taking model of democratic governance — continues to recede, yielding to the supervised life of the entitlement state.”

Will the Repeal of ObamaCare Kill 22,000 People?


Excellent essay on Obamacare by my Baylor colleague, health economist Jim Henderson…

Notable & Quotable


“U2 frontman and anti-poverty activist Bono has realized the importance of capitalism.”

The Fog of Obama’s Non-War


“It’s now seven weeks since a U.S. ambassador was murdered in Benghazi, Libya, and there are still no answers.”

Barack Obama and Other Has-Beens


“Bret Stephens writes in the WSJ that yesterday’s man of destiny is today’s peddler of spent ideas.”

Secretary of Say What?


President Obama now says he wants a cabinet officer for business. Seriously.

Hurricane Sandy: The Superstorm


Incredible photo-essay of the aftermath of Hurricane Sandy…

The Upside of Opportunism


Quoting from this NY Times article by David Brooks, “The bottom line is this: If Obama wins, we’ll probably get small-bore stasis; if Romney wins, we’re more likely to get bipartisan reform. Romney is more of a flexible flip-flopper than Obama. He has more influence over the most intransigent element in the Washington equation House Republicans. He’s more likely to get big stuff done.”

xkcd: Congress


Wow – An analysis of the partisan and ideological makeup of the US Congress going back to 1788 (when the first president of the United States was elected)…

Animals and their people


Wonderful photoessay on “Animals and their people” from the Boston Globe…

It’s a Wonderful Life! (with capitalism)

Ever wonder what life would be like without capitalism?

Fear No Hurricane: Obama Quietly Approved Federal Subsidies to Houses in Floodplains in July


Excellent timing! President Obama expanded a program offering subsidized insurance to ocean-front homeowners this summer.

Broken Window Fallacy


I am sure that Frédéric Bastiat must be turning over in his grave right now…