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Citation

“Quantifying the National Debt.” By James D. Agresti. Just Facts, July 29, 2009. Updated 10/5/09. http://justfacts.com/nationaldebt.asp

 

Introductory Notes

Unless otherwise stated, all dollar figures are indexed for inflation to produce numbers that are consistent in terms of the years 2008/2009.

Figures from specific years are used based on availability, not to produce a desired result by singling out certain years that are different from others.

This research is the first in a series of topics pertaining to the national debt. Future research will entail:

• Causes of the National Debt

• Accuracy of Government Accounting and Projections

• Voting Records and Promises of Politicians

• Economic Consequences of Government Debt

• Who Owns the National Debt?

• Media Coverage of the National Debt

• Indebtedness of State and Local Governments

• Personal Debt and Savings of Individual Americans

Click Here to support our work on these topics or to see our promotional video about the national debt.

 

Quantifying the National Debt

* As of October 1, 2009, the official debt of the United States government is $11.9 trillion ($11,920,519,164,319).[1] This amounts to:

• $39,205 for every person living in the U.S.[2]

• $102,074 for every household in the U.S.[3]

• more than $243,000 for every U.S. household that pays more in federal taxes than they receive in benefits from the federal government[4]

* Publicly-traded companies are legally required to account for “explicit” and “implicit” future obligations such as employee pensions and retirement benefits.[5] [6] [7] The federal budget, which is the “federal government’s primary financial planning and control tool,” is not bound by this rule.[8] [9]

* As of September 30, 2008 (the end of the federal government’s fiscal year), the federal government has:

• $6.3 trillion ($6,342,000,000,000) in liabilities such as federal employee retirement and veterans' benefits[10]

• $17.1 trillion ($17,188,000,000,000) in projected shortfalls in the Social Security program

• $31.8 trillion ($31,810,000,000,000) in projected shortfalls in the Medicare program

• $137 billion ($137,000,000,000) in projected shortfalls in other “social insurance” programs[11]

These projected shortfalls are referred to as “closed group present values” and are calculated in a manner that approximates how publicly–traded companies are required to calculate their debts and obligations.[12] [13] [14] The figures represent how much money must be immediately placed in interest-bearing investments to cover the shortfalls between projected revenues and expenditures for all current taxpayers and beneficiaries in these programs.[15] [16] [17]

* Combining the figures above with the national debt and subtracting the value of federal assets, the federal government has $59.3 trillion ($59,338,000,000,000) in debt, liabilities, and unfunded obligations as of September 30, 2008.[18] This exceeds the combined net worth of all U.S. households including assets in real estate, corporate stocks, private businesses, and consumer durable goods such as automobiles, televisions, and furniture.[19] [20] In dollar terms, this shortfall equates to:

• $195,152 for every person living in the U.S.[21]

• $508,104 for every household in the U.S.[22]

• more than $1,209,000 for every U.S. household that pays more in federal taxes than they receive in benefits from the federal government[23]

* These figures do not account for:

• 1.7 trillion dollars in publicly held debt accumulated during the 2009 federal fiscal year[24] [25]

• future deficits implied by any federal policies outside of the “social insurance” programs detailed above[26]

* These figures depend upon several assumptions, including the following:

• government projections about future economic conditions are accurate. (The “2008 Financial Report of the United States Government” projected unemployment would average 5.6% during fiscal year 2009.[27] Nine months into this period, unemployment has averaged 8.1%.[28])

• the total shortfall ($59.3 trillion) is immediately placed in investments that consistently yield about 3% above the rate of inflation.[29] If this money is not set aside immediately, the interest compounds.[30] [31]

 

Notes

[1] Web page: “The Debt to the Penny and Who Holds It.” Bureau of the Public Debt, United States Department of the Treasury. Accessed October 5, 2009 at http://www.treasurydirect.gov/NP/BPDLogin?application=np

As of 10/1/2009, the “Total Public Debt Outstanding” is $11,920,519,164,319.

[2] Dataset: “Annual Estimates of the Resident Population for the United States, Regions, States, and Puerto Rico: April 1, 2000 to July 1, 2008.” U.S. Census Bureau, December 22, 2008. http://www.census.gov/popest/states/NST-ann-est.html

 

	July 1, 2008
United States	304,059,724

CALCULATION: $11,920,519,164,319 / 304,059,724 people = $39,205/person

[3] Dataset: “Average Number of People per Household, by Race and Hispanic Origin, Marital Status, Age, and Education of Householder: 2008.” U.S. Census Bureau, January 2009. http://www.census.gov/population/www/socdemo/hh-fam/cps2008.html

Total households = 116,783,000

CALCULATION: $11,920,519,164,319 / 116,783,000 households = $102,074/household

[4] Calculations performed with data from the following sources:

a) Dataset: “Average Number of People per Household, by Race and Hispanic Origin, Marital Status, Age, and Education of Householder: 2008.” U.S. Census Bureau, January 2009. http://www.census.gov/population/www/socdemo/hh-fam/cps2008.html

Total households = 116,783,000

b) Report: “Who Pays America’s Tax Burden, and Who Gets the Most Government Spending?” By Andrew Chamberlain, Gerald Prante, & Scott A. Hodge. Tax Foundation, March 2007. http://www.taxfoundation.org/files/sr151.pdf

Page 3:

Summary of the Full Study’s Methodology

• Time period: Calendar Year 2004.

• Unit of analysis: Households.

• Presentation of results: Quintiles of household cash money income containing equal number of individuals, and unequal numbers of households.

• Data sources: Bureau of Economic Analysis, U.S. Census Bureau, U.S. Bureau of Labor Statistics, Office of Management and Budget, Centers for Medicare and Medicaid Services, and Tax Foundation.

 

	Quintile
	1	2	3	4	5
Number of Individuals	58,217,357	58,246,236	58,414,918	58,058,486	58,229,201
Number of Households	30,377,708	24,520,544	21,249,055	19,265,699	18,062,718

Pages 7-8:

Using official survey data from the federal government, we’re able to figure out which households in America are most likely to use all the different government programs on the books—public housing, roads, schools, the Postal Service, unemployment compensation, Medicaid, college tuition subsidies, and so on. Once we’ve walked through every government program and have allocated the costs to those who use them, the total received by each household is what we call “government spending received” in this report.

 

Quintile	Income/Household	Federal Taxes Paid per Household	Federal Spending Received per Household
Bottom 20%	$0 - $23,699	$1,684	$24,860
Second 20%	$23,700 - $42,304	$6,644	$19,889
Third 20%	$42,305 - $65,00	$13,028	$16,781
Fourth 20%	$65,001 - $99,502	$22,719	$15,502
Top 20%	$99,503 and up	$57,512	$18,573

CALCULATIONS:

37,328,417 houses in the top 2 quintiles + (0.5 × 21,249,055 houses in the third quintile†) ≈ 47,952,944 households that pay more in federal taxes than they receive in federal government spending

47,952,944 households that pay more in federal taxes than they receive in federal government spending / 113,475,724 total households (2004) = 42%

0.42 × 116,783,000 total households (2008) = 49,048,860 households that pay more in federal taxes than they receive in federal government spending

$11,920,519,164,319 / 49,048,860 households = $243,034 per household

NOTES:

† Even through households in the third quintile receive an average of $3,753 more in federal spending than they pay in taxes, this does not necessarily mean a significant percentage of this group does not. Hence, in accordance with Just Facts’ Standards of Credibility (one of which is to use “figures and facts that are contrary to our viewpoints”), half of these households are included in the approximation of those who pay more in federal taxes than they receive in federal spending.

The figures above are based on data from 2004. Given that

• unemployment was 5.5% in 2004 and 8.9% in April 2009,‡

• federal outlays increased at a greater rate than federal tax receipts between 2004 and April 2009,§

• laws enacted and demographic changes that took place between 2004 and June 2009 have pushed more households into the category of those who receive more in federal spending than they pay in federal taxes,#

there can be no doubt that as compared to 2004, a smaller percentage of households are now paying more in federal taxes than they receive in federal spending. Thus, the 42% figure represents an absolute maximum, and is in all probability significantly lower. Consequently, the debt per household paying more in federal taxes than they receive in federal spending is undoubtedly higher than $243,034. Hence, the use of the term “more than.”

‡ Table: “Unemployment Rate - Civilian Labor Force - LNS14000000.” Bureau of Labor Statistics, U.S. Department of Labor. Data extracted June 1, 2009. http://data.bls.gov/cgi-bin/surveymost?ln

§ Comparison of data from the following two sources:

Report: “Monthly Budget Review Through April 2009.” Congressional Budget Office, May 7, 2009. http://cbo.gov/ftpdocs/101xx/doc10114/05-2009-MBR.htm

Report: “Monthly Budget Review Through April 2004.” Congressional Budget Office, May 6, 2009. http://cbo.gov/doc.cfm?index=5417&type=0

COMPARISON:

The federal fiscal begins on October 1st. Below is data on the first 7 months of fiscal years 2004 and 2009:

 

	Outlays	Receipts	Deficit
2004	$1,357,000,000,000	$1,072,000,000,000	$285,000,000,000
2009	$2,053,000,000,000	$1,254,000,000,000	$799,000,000,000
Increase	51%	17%	180%

# The latest data from the Congressional Budget Office on federal effective tax rates by household income only extends until 2006 [“Data on the Distribution of Federal Taxes and Household Income.” Congressional Budget Office, April 2009. http://www.cbo.gov/publications/collections/taxdistribution.cfm], but since 2001, Just Facts has been monitoring all major federal legislation and keeping abreast of the demographic changes that impact federal spending and taxes. Without delving into numerous details, suffice it to say that these factors have moved a greater percentage of households into the category of those who pay less in federal taxes than they receive in federal benefits.

[5] Report: “Enron: Selected Securities, Accounting, and Pension Laws Possibly Implicated in its Collapse.” By Michael V. Seitzinger, Marie B. Morris, and Mark Jickling. Congressional Research Service, The Library of Congress, January 16, 2002. http://fpc.state.gov/documents/organization/7960.pdf

Page 2:

Among the disclosures of publicly traded companies are accounting statements. Since financial information is of little use to investors unless all firms use comparable accounting methods, the securities laws give the Securities and Exchange Commission broad authority to establish standards for financial reporting. The SEC has delegated the task of writing accounting standards to private sector bodies, and since 1973 the Financial Accounting Standards Board has been charged with formulating accounting and financial reporting standards.

[6] Summary of Statement No. 106: “Employers' Accounting for Postretirement Benefits Other Than Pensions.” Financial Accounting Standards Board, December 1990. http://www.fasb.org/st/summary/stsum106.shtml

This Statement establishes accounting standards for employers' accounting for postretirement benefits other than pensions…. It will significantly change the prevalent current practice of accounting for postretirement benefits on a pay-as-you-go (cash) basis by requiring accrual, during the years that the employee renders the necessary service, of the expected cost of providing those benefits to an employee and the employee's beneficiaries and covered dependents. …

… The Board believes that measurement of the obligation and accrual of the cost based on best estimates are superior to implying, by a failure to accrue, that no obligation exists prior to the payment of benefits. The Board believes that failure to recognize an obligation prior to its payment impairs the usefulness and integrity of the employer's financial statements. …

The provisions of this Statement are similar, in many respects, to those in FASB Statements No. 87, Employers’ Accounting for Pensions, and No. 88, Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits. …

This Statement relies on a basic premise of generally accepted accounting principles that accrual accounting provides more relevant and useful information than does cash basis accounting. …

[L]ike accounting for other deferred compensation agreements, accounting for postretirement benefits should reflect the explicit or implicit contract between the employer and its employees.

[7] Book: Finance for Managers. By Richard Luecke and Samuel L. Hayes. Harvard Business School Press, 2002. Page 39:

In contrast to cash-basis accounting, accrual accounting records transactions as they are made, whether or not the cash has actually changed hands. Most companies of any size use accrual accounting. This system provides a better matching between revenues and their associated cost, which helps companies understand the true causes and effect of business activities. Accordingly, revenues are recognized during the period in which the sales activities occur, whereas expenses are recognized in the same period as their associated revenues.

[8] See the three notes above for details regarding the manner in which publicly–traded companies are required to calculate their debt and obligations using accrual-based accounting. The following note explains that the federal budget, in contrast, is calculated on a cash basis. More details are spelled out here.

[9] “2008 Financial Report of the United States Government.” U.S. Department of the Treasury, 2008. http://www.fms.treas.gov/fr/08frusg/08frusg.pdf

Page 21 (in pdf): “The President’s Budget (Budget), the Government’s primary financial planning and control tool, describes how the Government spent and plans to spend the money it collects.

Page 30 (in pdf): President’s Budget … Prepared primarily on a ‘cash basis’

[10] “2008 Financial Report of the United States Government.” U.S. Department of the Treasury, 2008. http://www.fms.treas.gov/fr/08frusg/08frusg.pdf

Page 19 (in pdf): “Pursuant to 31 U.S.C. § 331(e)(1), the Department of the Treasury must submit the Report, which is subject to audit by the Government Accountability Office (GAO), to the President and Congress no later than six months after the September 30 fiscal year-end.”

Page 57 (in pdf):

United States Government Balance Sheets as of September 30, 2008, and September 30, 2007

 

Liabilities	2008 (billions $)
Accounts payable	73.3
Federal employee and veteran benefits payable	5,318.9
Environmental and disposal liabilities	342.8
Benefits due and payable	144.4
Insurance program liabilities	77.8
Loan guarantee liabilities	72.9
Keepwell payable	13.8
Other liabilities	298.1
Total of above (excludes national debt)	6,342

[11] “2008 Financial Report of the United States Government.” U.S. Department of the Treasury, 2008. http://www.fms.treas.gov/fr/08frusg/08frusg.pdf

Page 28 (in pdf):

Table 3 Social Insurance Future Expenditures in Excess of Future Revenues

 

	2008 (billions $)
Social Security (Closed Group)	17,188
Medicare (Closed Group)	31,810
Other (Closed Group)	137
Total	49,135

[12] See here, here, and here for details regarding the manner in which publicly–traded companies are required to calculate their debt and obligations using accrual-based accounting. The following two notes show that the federal budget, in contrast, is calculated on a cash basis. These notes also show that accrual-based accounting is used in the “Annual Financial Report of the United States Government,” which is the source for the shortfall figures cited above.

[13] “2008 Financial Report of the United States Government.” U.S. Department of the Treasury, 2008. http://www.fms.treas.gov/fr/08frusg/08frusg.pdf

Page 21 (in pdf):

Each year, the Administration issues two reports which detail the financial results for the Government. The President’s Budget (Budget), the Government’s primary financial planning and control tool, describes how the Government spent and plans to spend the money it collects. By comparison, the accrual-based Financial Report of the United States Government (Report) includes the cost of operations, the sources used to finance those costs, how much the Government owns and owes, and the outlook for its social insurance programs.

Page 30 (in pdf):

 

President’s Budget	Financial Report of the U.S. Government
Prepared primarily on a ‘cash basis’	Prepared on an ‘accrual basis’

[14] Report: “Understanding the Primary Components of the Annual Financial Report of the United States Government.” U.S. Government Accountability Office, September, 2005. http://www.gao.gov/new.items/d05958sp.pdf

Page 5:

Accrual accounting, which is also used by private business enterprises, is the basis for U.S. generally accepted accounting principles for federal government entities. It is intended to provide a complete picture of the federal government’s financial operations and financial position. The federal government primarily uses the cash basis of accounting for its budget, which is the federal government’s primary financial planning and control tool.

Page 6:

The accrual basis of accounting recognizes revenue when it is earned and recognizes expenses in the period incurred, without regard to when cash is received or disbursed. The federal government, which receives most of its revenue from taxes, nevertheless recognizes tax revenue when it is collected, under an accepted modified cash basis of accounting.

[15] “2008 Financial Report of the United States Government.” U.S. Department of the Treasury, 2008. http://www.fms.treas.gov/fr/08frusg/08frusg.pdf

Page 51 (in pdf):

The [social insurance] estimates are actuarial present values² of the projections and are based on the economic and demographic assumptions representing the trustees’ best estimates as set forth in the relevant Social Security and Medicare trustees’ reports and in the relevant agency performance and accountability reports for the RRB and the Department of Labor (Black Lung). …

² Present values recognize that a dollar paid or collected in the future is worth less than a dollar today, because a dollar today could be invested and earn interest. To calculate a present value, future amounts are thus reduced using an assumed interest rate, and those reduced amounts are summed.

Page 60 (in pdf):

Participants for the Social Security and Medicare programs are assumed to be the “closed group” of individuals who are at least age 15 at the start of the projection period, and are participating as either taxpayers, beneficiaries, or both, except for the 2007 Medicare programs for which current participants are assumed to be at least 18 instead of 15 years of age.

Page 105 (in pdf):

The present values of future expenditures in excess of future revenue are the current amounts of funds needed to cover projected shortfalls, excluding the starting trust fund balances, over the projection period. They are calculated by subtracting the actuarial present values of future scheduled contributions and dedicated tax income by and on behalf of current and future participants from the actuarial present value of the future scheduled benefit payments to them or on their behalf.

[16] Report: “Social Security and Medicare Trust Funds and the Federal Budget.” By James Duggan and Christopher Soares. Office of Economic Policy, U.S. Department of Treasury, March 2008. http://www.treas.gov/offices/economic-policy/reports/budget_trust_fund_perspectives_2008.pdf

Page 16: “The resulting present value is the amount that would have to be put in the bank today at the assumed interest rate to fund the future cash flows.”

[17] “2008 Financial Report of the United States Government.” U.S. Department of the Treasury, 2008. http://www.fms.treas.gov/fr/08frusg/08frusg.pdf

NOTES:

a) In this report, starting trust fund balances of the various social programs are not included in the shortfall calculations.† Just Facts accounts for this in the next endnote when all these figures are totaled to calculate “debt, liabilities, and unfunded obligations” for the federal government as a whole.

† Page 123 (in pdf): “The present values of future expenditures in excess of future revenue [for the social insurance programs] are the current amounts of funds needed to cover projected shortfalls, excluding the starting trust fund balances, over the projection period.”

b) In addition to the “closed group” projected shortfalls, this report also contains projections for the “open-group” and “infinite horizon.” Details are below.

Page 28 (in pdf):

‘Closed’ Group and ‘Open’ Group differ by the population included in each calculation. From the [Statement of Social Insurance], the ‘Closed’ Group includes: (1) participants who have attained eligibility and (2) participants who have not attained eligibility. The ‘Open’ Group adds future participants to ‘Closed’ Group.

Page 122 (in pdf):

Current participants in the Social Security and Medicare programs form the “closed group” of taxpayers and/or beneficiaries who are at least age 15 at the start of the projection period. For the 2007 Medicare projections, current participants are at least 18 years of age at the beginning of the projection period. Since the projection period for the Social Security, Medicare, and Railroad Retirement social insurance programs consists of 75 years, the period covers virtually all of the current participants’ working and retirement years, a period that could be more than 75 years in a relatively small number of instances.

Page 155 (in pdf):

[W]hen calculating unfunded obligations, a 75-year horizon includes revenue from some future workers but only a fraction of their future benefits. In order to provide a more complete estimate of the long-run unfunded obligations of the programs, estimates can be extended to the infinite horizon. The open-group infinite horizon net obligation is the present value of all expected future program outlays less the present value of all expected future program tax and premium revenues. …

In comparison to the analogous 75-year [projection], extending the calculations beyond 2082, captures the full lifetime benefits and taxes and premiums of all current and future participants. The shorter horizon understates financial needs by capturing relatively more of the revenues from current and future workers and not capturing all of the benefits that are scheduled to be paid to them.

Pages 28, 59 145, 155 (in pdf):

 

Program	75-Year Closed Group (billions $)	75-Year Open Group (billions $)	Infinite Horizon  (billions $)
Social Security	17,188	6,555	15,900
Medicare	31,810	36,312	85,900
Other	137	104	?
Total	49,135	42,970	101,800 + ?

Totals may not equal the sum of components due to rounding.

[18] “2008 Financial Report of the United States Government.” U.S. Department of the Treasury, 2008. http://www.fms.treas.gov/fr/08frusg/08frusg.pdf

 

Federal Debt, Liabilities, Obligations, and Assets as of September 30, 2008
Category	(Billions $)
Publicly-Held Debt † ‡	5,836
Unfunded Liabilities §	6,342
Social Security Projected Shortfall #	17,188
Medicare Projected Shortfall #	31,810
Other Social Insurance Programs Combined Projected Shortfall #	137
Assets £	-1,975
Total	59,338

NOTES:

† Page 57 (in pdf): Federal debt securities held by the public and accrued interest as of September 30, 2008 = $5,836.2 billion

‡ The “Publicly-Held Debt” differs from the “National Debt” in that it excludes “intergovernmental debt,” which is money the federal government owes to various trust funds such as Social Security’s. Hence, to be consistent, the social program shortfalls shown in the table above do not include their starting trust fund balances. Facts regarding why and how the federal government keeps its books in this manner will be covered at a later date in the section of this paper entitled “Real National Debt.” In the meantime, to understand this issue, visit our Exclusive News Service article: The Impact of Social Security on the National Debt.

Page 123 (in pdf): “The present values of future expenditures in excess of future revenue [for the social insurance programs] are the current amounts of funds needed to cover projected shortfalls, excluding the starting trust fund balances, over the projection period.”

§ Page 57 (in pdf).

# Page 28 (in pdf).

£ Page 35 (in pdf):

United States Government Statements of Net Cost for the Years Ended September 30, 2008, and September 30, 2007

 

Assets	2008 (billions $)
Cash and other monetary assets	424.5
Accounts and taxes receivable, net	93.0
Loans receivable, net	263.4
Inventories and related property, net	289.6
Property, plant, and equipment, net	737.7
Securities and investments	79.6
Investments in Government sponsored enterprises	7.0
Other assets	79.9
Total	1974.7

[19] Report: “Flow of Funds Accounts of the United States.” Board of Governors of the Federal Reserve System, June 11, 2009. http://www.federalreserve.gov/releases/z1/current/z1.pdf

Page 2: “Household net worth—the difference between the value of assets and liabilities—was an estimated $50.4 trillion at the end of the first quarter of 2009, $1.3 trillion dollars less than at the end of 2008.”

Page 102 (110 in pdf):

B.100 Balance Sheet of Households and Nonprofit Organizations

Billions of dollars; not seasonally adjusted

 

	2008 Q3	2008 Q4	2009 Q1
Net worth	56,583.4	51,706.2	50,376.5

NOTE: Nonprofit organizations are explicitly named in the title of this table because their assets are not considered household property, whereas the assets of corporations are considered household property. Household assets listed this table include items such as real estate, corporate equities, mutual funds, equity in noncorporate businesses, life insurance, pension fund reserves, and consumer durable goods.

[20] Web page: “Updated PPI Commodity Weight Allocations to Stage-of-Processing Indexes.” Bureau of Labor Statistics. Last modified February 18, 2009. http://www.bls.gov/ppi/ppisopallo.htm

“SOP 3130 - Consumer Durable Goods: contains nonfood products, ready for final consumption, with a life expectancy of more than three years. Examples of durable goods include furniture, passenger cars, and appliances.”

[21] Dataset: “Annual Estimates of the Resident Population for the United States, Regions, States, and Puerto Rico: April 1, 2000 to July 1, 2008.” U.S. Census Bureau, December 22, 2008. http://www.census.gov/popest/states/NST-ann-est.html

 

	July 1, 2008
United States	304,059,724

CALCULATION: $59,338,000,000,000 / 304,059,724 people = $195,152/person

[22] Dataset: “Average Number of People per Household, by Race and Hispanic Origin, Marital Status, Age, and Education of Householder: 2008.” U.S. Census Bureau, January 2009. http://www.census.gov/population/www/socdemo/hh-fam/cps2008.html

Total households = 116,783,000

CALCULATION: $59,338,000,000,000 / 116,783,000 households = $508,104/household

[23] Calculations performed with data from the following sources:

Dataset: “Average Number of People per Household, by Race and Hispanic Origin, Marital Status, Age, and Education of Householder: 2008.” U.S. Census Bureau, January 2009. http://www.census.gov/population/www/socdemo/hh-fam/cps2008.html

Total households = 116,783,000

Report: “Who Pays America’s Tax Burden, and Who Gets the Most Government Spending?” By Andrew Chamberlain, Gerald Prante, & Scott A. Hodge. Tax Foundation, March 2007. http://www.taxfoundation.org/files/sr151.pdf

Page 3:

Summary of the Full Study’s Methodology

• Time period: Calendar Year 2004.

• Unit of analysis: Households.

• Presentation of results: Quintiles of household cash money income containing equal number of individuals, and unequal numbers of households.

• Data sources: Bureau of Economic Analysis, U.S. Census Bureau, U.S. Bureau of Labor Statistics, Office of Management and Budget, Centers for Medicare and Medicaid Services, and Tax Foundation.

 

	Quintile
	1	2	3	4	5
Number of Individuals	58,217,357	58,246,236	58,414,918	58,058,486	58,229,201
Number of Households	30,377,708	24,520,544	21,249,055	19,265,699	18,062,718

Pages 7-8:

Using official survey data from the federal government, we’re able to figure out which households in America are most likely to use all the different government programs on the books—public housing, roads, schools, the Postal Service, unemployment compensation, Medicaid, college tuition subsidies, and so on. Once we’ve walked through every government program and have allocated the costs to those who use them, the total received by each household is what we call “government spending received” in this report.

 

Quintile	Income/Household	Federal Taxes Paid per Household	Federal Spending Received per Household
Bottom 20%	$0 - $23,699	$1,684	$24,860
Second 20%	$23,700 - $42,304	$6,644	$19,889
Third 20%	$42,305 - $65,00	$13,028	$16,781
Fourth 20%	$65,001 - $99,502	$22,719	$15,502
Top 20%	$99,503 and up	$57,512	$18,573

CALCULATIONS:

37,328,417 houses in the top 2 quintiles + (0.5 × 21,249,055 houses in the third quintile†) ≈ 47,952,944 households that pay more in federal taxes than they receive in federal government spending

47,952,944 households that pay more in federal taxes than they receive in federal government spending / 113,475,724 total households (2004) = 42%

0.42 × 116,783,000 total households (2008) = 49,048,860 households that pay more in federal taxes than they receive in federal government spending

$59,338,000,000,000 / 49,048,860 households = $1,209,773 per household

† Even through households in the third quintile receive an average of $3,753 more in federal spending than they pay in taxes, this does not necessarily mean a significant percentage of this group does not. Hence, in accordance with Just Facts’ Standards of Credibility (one of which is to use “figures and facts that are contrary to our viewpoints”), half of these households are included in the approximation of those who pay more in federal taxes than they receive in federal spending.

The figures above are based on data from 2004. Given that

• unemployment was 5.5% in 2004 and 8.9% in April 2009,‡

• federal outlays increased at a greater rate than federal tax receipts between 2004 and April 2009,§

• laws enacted and demographic changes that took place between 2004 and June 2009 have pushed more households into the category of those who receive more in federal spending than they pay in federal taxes,#

there can be no doubt that as compared to 2004, a smaller percentage of households are now paying more in federal taxes than they receive in federal spending. Thus, the 42% figure represents an absolute maximum, and is in all probability significantly lower. Consequently, the shortfall per household paying more in federal taxes than they receive in federal spending is undoubtedly higher than $1,209,773. Hence, the use of the phrase “more than.”

‡ Table: “Unemployment Rate - Civilian Labor Force - LNS14000000.” Bureau of Labor Statistics, U.S. Department of Labor. Data extracted June 1, 2009. http://data.bls.gov/cgi-bin/surveymost?ln

§ Comparison of data from the following sources:

Report: “Monthly Budget Review Through April 2009.” Congressional Budget Office, May 7, 2009. http://cbo.gov/ftpdocs/101xx/doc10114/05-2009-MBR.htm

Report: “Monthly Budget Review Through April 2004.” Congressional Budget Office, May 6, 2009. http://cbo.gov/doc.cfm?index=5417&type=0

NOTE: The federal fiscal begins on October 1st. Below is a comparison of the first 7 months of fiscal year 2004 vs. 2009:

 

	Outlays	Receipts	Deficit
2004	$1,357,000,000,000	$1,072,000,000,000	$285,000,000,000
2009	$2,053,000,000,000	$1,254,000,000,000	$799,000,000,000
Increase	51%	17%	180%

# The latest data from the Congressional Budget Office on federal effective tax rates by household income only extends until 2006 [“Data on the Distribution of Federal Taxes and Household Income.” Congressional Budget Office, April 2009. http://www.cbo.gov/publications/collections/taxdistribution.cfm], but since 2001, Just Facts has been monitoring all major federal legislation and keeping abreast of the demographic changes that impact federal spending and taxes. Without delving into numerous details, suffice it to say that these factors have moved a greater percentage of households into the category of those who pay less in federal taxes than they receive in federal benefits.

[24] “2008 Financial Report of the United States Government.” U.S. Department of the Treasury, 2008. http://www.fms.treas.gov/fr/08frusg/08frusg.pdf

Page 19 (in the pdf document) states that September 30^th is the end of the federal government's fiscal year.

[25] Calculation performed with data from the web page: “The Debt to the Penny and Who Holds It.” Bureau of the Public Debt, United States Department of the Treasury. Accessed October 5, 2009 at http://www.treasurydirect.gov/NP/BPDLogin?application=np

 

Date	Debt Held by the Public
10/01/2008	$5,850,791,254,967
09/30/2009	$7,551,861,558,736
Increase	$1,701,070,303,769

NOTE: Only the "publicly held debt" or "debt held by the public" is computed here to avoid double-counting the debts owed to various federal trust funds. More details will be provided at a later date in a section of this paper entitled “Real National Debt.” In the meantime, to understand this issue, visit our Exclusive News Service article: The Impact of Social Security on the National Debt.

[26] “2008 Financial Report of the United States Government.” U.S. Department of the Treasury, 2008. http://www.fms.treas.gov/fr/08frusg/08frusg.pdf

Page 28 (in pdf):

The SOSI [Statement of Social Insurance] provides additional perspective on the Government’s long term estimated exposures and costs. However, it should be noted that the Government’s financial statements do not reflect future costs implied by any current policy, such as national defense, the global war on terrorism, and disaster relief and recovery.

[27] “2008 Financial Report of the United States Government.” U.S. Department of the Treasury, 2008. http://www.fms.treas.gov/fr/08frusg/08frusg.pdf

Page 148: “Table 10 shows present values of 10-year projections of revenues and expenditures for the Unemployment Insurance Program…. For expected economic conditions, the estimates are based on an unemployment rate of 5.58 percent during fiscal year 2009, decreasing to 4.80 percent in fiscal year 2013 and thereafter.”

[28] Table: “Unemployment Rate - Civilian Labor Force - LNS14000000.” Bureau of Labor Statistics, U.S. Department of Labor. Data extracted July 7, 2009. http://data.bls.gov/cgi-bin/surveymost?ln

 

Unemployment Rate – Fiscal Year 2009
Oct	Nov	Dec	Jan	Feb	Mar	Apr	May	Jun	Average
6.6%	6.8%	7.2%	7.6%	8.1%	8.5%	8.9%	9.4%	9.5%	8.1%

[29] Calculations performed with data from Table VI.F6: “Selected Economic Variables, Calendar Years 2007-85, Intermediate Cost Assumptions.” United States Social Security Administration, March 25, 2008. http://www.socialsecurity.gov/OACT/TR/TR08/lr6f6.html

NOTES:

The economic assumptions contained in this table are those used in the Social Security Trustee’s Report. The “Adjusted CPI” (inflation) and “Compound Interest Rate Factor” (yield of investments) were annualized and averaged over the 75 year projection period. The result was an average annual interest rate of 5.77% and an average annual inflation of 2.8%, the difference between these two figures amounting to 2.97%.

It is assumed the other social insurance programs use approximately the same assumptions, as is the case for Medicare as shown pages 126-127 of the “2008 Financial Report of the United States Government” (see next note).

[30] “2008 Financial Report of the United States Government.” U.S. Department of the Treasury, 2008. http://www.fms.treas.gov/fr/08frusg/08frusg.pdf

Page 51 (in pdf): “Present values recognize that a dollar paid or collected in the future is worth less than a dollar today, because a dollar today could be invested and earn interest. To calculate a present value, future amounts are thus reduced using an assumed interest rate, and those reduced amounts are summed.”

[31] An example of how this interest compounds can be seen in calculations performed by the U.S. Social Security Administration. The “75-year open group unfunded obligation” is listed at $4.3 trillion in the 2008 Trustee’s Report.† Yet, if these same projected deficits are allowed to accumulate, the shortfall would amount to $36 trillion (in 2008 dollars) by 2082.‡

† “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

Page 59: “The present value of future cost less future tax income over the long-range period, minus the amount of trust fund assets at the beginning of the projection period, amounts to $4.3 trillion for the [Social Security] program. This amount is referred to as the 75-year ‘open group unfunded obligation’.”

‡ Calculation performed with data from the following sources:

a) Report: “Combined OASDI Trust Fund Operations: 2008 Trustees Report Intermediate Assumptions.” Office of the Chief Actuary, United States Social Security Administration, October 16, 2008.

The Social Security Trust Fund end of year assets are projected to be -$277,143,351,000,000 in 2082.

b) Web page: “Selected Economic Variables: Table VI.F6.-Selected Economic Variables Calendar Years 2007-85.” United States Social Security Administration. Last reviewed or modified March 25, 2008. http://www.socialsecurity.gov/OACT/TR/TR08/lr6f6.html

[The adjusted CPI (consumer price index) from this table is 769.36 for 2082.]

CALCULATION: -277.1 trillion (2082 $)  (769.36/100) = -36.0 trillion (2008 $)

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