It’s fairly common these days to read or hear sometime talking about how bad the deficit is, but “the real situation is far, far worse.” The discussion then turns from describing a 1.3 trillion dollar deficit and 14 trillion dollar debt, to numbers like 100 trillion worth of “unfunded liabilities.” The usual point being, of course, that the United States is on the brink of catastrophic fiscal meltdown which — if not fixed by drastic reductions in spending and probably elimination of all pensions and safety nets — will lead to national bankruptcy, hyperinflation, and the specter of authoritarianism and other evils.
It’s a fairly compelling story, and it certainly has managed to scare the living s**t out of many Americans, leading to the rise of the Tea Party movement, attempts to destroy public sector unions, and radical budget cutting fever in Congress.
It’s also a carefully constructed story, which happens to succeed only by comparing apples to oranges. In other words, while we do have lots of debt and unfunded liabilities, the picture is nowhere near as grim as is being suggested. I intend to go through some simple numbers below which demonstrate that we can handle both our current deficits, and the larger issue of the social safety net, “within the system,” and that collapse is not inevitable.