Out of curiosity, is that US total debt figure including or not including the portion owed to Social Security?
That figure is the external debt. Which does not include the "debt" to the Social Security Administration. I have read that the unfunded liability of the SSA (you know, the sort of thing that corporations get slammed for in court regularly) is on the order of $100 trillion.
See, there was a wonderful bait-and-switch pulled on the middle and working classes over the last 25 years or so that went like this:
1. Notice that Social Security will eventually be broke unless we do something about it. A commission led by Alan Greenspan is formed to figure out what to do about it.
2. The commission recommends raising FICA taxes to build up a surplus in the so-called Social Security Trust Fund, to reduce the risk of having to cut SS benefits. Congress follows the recommendations of the commission.
Which had already happened before that, and will happen again.
>3. Fast forward about a decade, and lo and behold government is running a surplus if you include the extra SS revenue (but a deficit if you don't). So when George W Bush gets into office, he says "We'll send everyone a $300 check as their portion of the surplus, and also use the surplus to justify a nice hefty tax cut for the top tax brackets."
But, but...it was the Clinton Administration that claimed that we had a surplus. Bush taking them at their word was disingenuous at best, but otherwise he'd have had to call them liars (and the lads on the left would have crucified him). Plus, of course, opposing his proposed income tax cut on the grounds that the "surplus" that Clinton had achieved wasn't REALLY a surplus would have made the Democrats and the Media look bad....
4. And lastly, since the SS Trust Fund "doesn't exist", the same people then argued that either benefits had to be cut, or the SS system privatized, because government couldn't afford it anymore.
Actually, they suggested privatizing it since the stock market was appreciating in value far faster than your "investment" in Social Security. They fell for the "but prices will NEVER go down" fallacy that infected so many people during that period.
Note: about five years ago, in discussing housing in Florida, I heard three well-educated, technically literate people assert that "housing prices could never go down". When I realized I was the only dissenter from that PoV, I went home, wrote my mortgage company a really big check, and have been the sole owner of my home since.
The effect of this is that over the last 20 years overall tax burden is shifted from the progressive income taxes to the regressive FICA taxes.
Yep, pretty much. And that process will continue. It can't help it, really. SSA is structured such that it MUST be paid from SS taxes. As the fraction of our population of SS age increases (as it has pretty much every year since it was instituted), the amount of SS taxes must increase.
And as the amount of SS taxes increase, the fraction of our budget that is the SSA will increase. Note that the SSA is the largest single budget item today. And while you can cut the Defense Department, you can't cut SSA (paid for by SS taxes) and Medicare (paid for by Medicare taxes) (first and third largest items in the budget right now).
In order to actually balance the current budget, we'd have to eliminate the Defense Department, and reduce all other discretionary spending by ~70%.
Or, alternately, double income taxes across the board.
Frequently, the same folks who argue that the SS Trust Fund doesn't exist and therefor SS shouldn't exist also include the T-Bills owned by Social Security in the "Total US debt" figure as a way to argue for cuts to other programs.
It doesn't exist. Simple thought experiment to demonstrate its existence or non-existence:
Assume it exists. When the SSA finally reaches the point that it must start redeeming those T-Bills, figure out what will happen (hint: the government will raise SS taxes and/or increase the external debt to match the decrease in the "debt" to the SSA.
Assume it doesn't exist. When the SSA finally reaches the point where it must start redeeming those T-Bills, figure out what will happen (hint: see above hint).
If the result is the same assuming the SS Trust Fund exists as if it doesn't exist, then it doesn't exist.
