Friday, May 29, 2009

Government Debt Burden Is Half A Million Per Household

Never mind that 1Q GDP (-5.7% annualized) was "less bad" than the last month's first estimate (it was actually worse than the second consensus by the economists). The US household is straddled with so much debt that makes you wonder how we can even afford a government.

In the article titled: "Leap in U.S. debt hits taxpayers with 12% more red ink", USA Today tells us that: [emphasis by me]

"Taxpayers are on the hook for an extra $55,000 a household to cover rising federal commitments made just in the past year for retirement benefits, the national debt and other government promises, a USA TODAY analysis shows.

"The 12% rise in red ink in 2008 stems from an explosion of federal borrowing during the recession, plus an aging population driving up the costs of Medicare and Social Security.

"That's the biggest leap in the long-term burden on taxpayers since a Medicare prescription drug benefit was added in 2003.

"The latest increase raises federal obligations to a record $546,668 per household in 2008, according to the USA TODAY analysis. That's quadruple what the average U.S. household owes for all mortgages, car loans, credit cards and other debt combined. "

Of household liabilities, the personal debt average is $121,953, according to USA Today. On top of that comes the government debt of $546,668, which includes ALL government liabilities - Treasury bonds, Medicare (52% of the government debt), Social Security, military pensions, civil servant retirement, and others.

Total: Each household owes $668,621. There are 111 million households in the US. Total national debt computes to $74 trillion, of which the government debt is over $60 trillion.

The article, however, may be underestimating the Medicare obligation. This analysis in 2005 for Senate Budget Committee shows the Medicare total obligation ALONE at $61 trillion.

The government portion of the debt is guaranteed to increase (already declared by the administration) this year, next year, and year after, with new programs and packages coming online. Red ink as far as eyes can see. No wonder the government doesn't do GAAP accounting.

The US GDP is $14 trillion.

The stock market is slightly down despite the "less bad" GDP number. At 11:54 am EST, Dow is down 22 points to 8,381, Nasdaq down 5 points to 1,746, S&P500 down a fraction to 906 (commodity stocks are very strong). US dollar Index is below 80 (long-term support). Gold spot price is $978, up $19. Crude oil is $66.26, up $1.18.

The market is also on a death watch of one of the America's iconic companies (GM).


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