All of a sudden, I read everywhere that the U.S. national debt is around 35% of GDP, although the massive deficits resulting from past fiscal recklessness are likely to increase it to 60% or more, a new post-war record, over the next few years. I’ve read the 35% of GDP figure in the Financial Times, Bloomberg News, Wall Street Journal, MSNBC, etc. Everywhere the national debt is discussed. Funny but until I few months ago I had been reading for years that the national debt was already around 60% of GDP. And that’s what I find in the Statistical Abstract of the United States. So what disappeared? Among other things, the Social Security Trust fund.
That trust fund is the result of all those extra payroll taxes low, moderate and middle-income workers have paying in, in excess of what Social Security has paid out, since the huge payroll tax increase of 1983, which was coupled with benefit reductions for younger generations of workers. The federal government spent the money on income tax cuts and extra senior citizen health care for the generations in charge, and left IOUs. But now the federal government needs to borrow $trillions more over and above the amount it is diverting from Social Security, and our foreign creditors are beginning to worry (as well they should) that the United States could never pay both them and Social Security back. And all of a sudden — poof! — the trust funds are no longer part of the national debt. Get the picture?