SB - White House to paint grim fiscal picture - what do these numbers mean to an individual ?

Posted by Gregor Gregersen on 01 Feb 2010


After a 1.4 trillion deficit in 2009 the white house predicts a 1.6 trillion (1.6 million millions or 1,600,000,000,000 USD) deficit for 2010 (see article White House to paint grim fiscal picture).

How does the deficit relate to the average US citizen

We took data from the January 2010  "Employment Situation Summary" of the US Bureau of Labor Statistics and found that:

  • 308 million people live legally in the USA
  • 138 million civilian employees are currently working  
  • The average earning is 32,344 USD per year 
This means that in 2009 every US citizen accumulated an additional 4,545 USD in federal government debt (1,400,000 / 308). When divided by the working population only the burden increased by 10,144 USD per worker (1,400,000 / 138).    
 
For 2010 the 1,600,000 million USD deficit will add an additional 11,594 USD per US worker (or 5,195 USD per person)  to the total debt. Keep in mind that these numbers are only US federal deficits and do not include state deficits (California for example is battling with a default) or city level deficits (which collect property taxes and are hardest hit by falling property prices). 
 
 
How does the federal debt relate to the average US citizen
 
The often quoted US debt of 12 trillion USD does not include unfunded liabilities for Social Security, Medicare and Medicaid which are many times higher. The unfunded liabilities represent the amount of money required today to pay for the retirement and medical promises made by the federal government to its citizens. No money has been put aside for these costs as it is a pay-as-you-go system and no savings have been made for the baby-boomer retiremetn wave which starts in 2010 (imagine a CPF account with no money in it).   
 
The unfunded liabilities and current federal debt amount to about 55,000,000* million USD as of early 2010. This is 178,571 USD of debt for every US citizen and about 398,550 USD of debt per worker.  
 
This leads us to a fundamental question:  How is the average US worker, who earns 32,344 USD gross income per year, ever expected to help pay back the 398,550 USD of public debt (per worker) that has been accumulated so far ?
 
If you have any ideas how this debt is ever to be paid back let us know. Meanwhile the debt burden will grow by another 11,594 USD per worker in 2010.
 
Countries in these situations have almost always debased their currency by printing (or today’s equivalent of issuing bonds that are then bought by the FED itself) more currency as it is a short term solution to keep things running a bit longer. But what about the medium and long term ?  
   
by
 
G. Gregersen
 
Disclaimer: The author owns physical silver and gold and will be accumulating more silver as a long term investment. It is the author’s belief that a systematic decline of confidence in the USD and US bonds will cause large amounts of funds to flow into traditional forms of money which cannot be arbitrarily printed (physical gold and silver bullion as opposed to paper derivatives).   
 
*A good estimate and overview of US debts and unfunded liabilities can be found at http://www.usdebtclock.org/  also take a look at IOUSA http://www.youtube.com/watch?v=O_TjBNjc9Bo