The idea that the current financial crisis is going to cost $1 trillion dollars is shocking to many. Not to me. After all, we have an economy where the GDP is just over $14 trillion. A large financial melt down costing $1 trillion? Sure I can see that. And normally a government for a $14 trillion economy could afford that kind of a bailout.
So why the title of this post? Well, suppose we did to the government what it forces all private coporations to do: list all of its future liabilities. What would that do? We’ll according to Richard Fisher, the head of the Dallas Federal Reserve,
Please sit tight while I walk you through the math of Medicare. As you may know, the program comes in three parts: Medicare Part A, which covers hospital stays; Medicare B, which covers doctor visits; and Medicare D, the drug benefit that went into effect just 29 months ago. The infinite-horizon present discounted value of the unfunded liability for Medicare A is $34.4 trillion. The unfunded liability of Medicare B is an additional $34 trillion. The shortfall for Medicare D adds another $17.2 trillion. The total? If you wanted to cover the unfunded liability of all three programs today, you would be stuck with an $85.6 trillion bill. That is more than six times as large as the bill for Social Security. It is more than six times the annual output of the entire U.S. economy.
And that is for just Medicare alone. Adding on Social Security we’d have to add on another $13 trillion. Just those two programs indicate a discounted net present value of just under $100 trillion dollars.
And people complain about greed and mismanagement on Wall Street.
Bwahahahahaha!
And just to make sure the point is fully understood lets explain what this means. Suppose we wanted to set aside the money for all the promised spending for Medicare and Social Security in an interest bearing account. How much would we have to set aside? $100 trillion. That is right now, we’d have to put aside $100 trillion dollars. But recall my comments in the opening paragraph. Our economy is only just over $14.3 trillion in terms of GDP. We’d need to set aside the GDP for the next seven years. All of it.
Seems to me the failure of the market pales in comparison to the failure of government. But what the Hell, lets go for more government. I’m sure they wont screw things up any worse than they already are.
