American Civics
Government's Financial Condition Difference between debt and operating costs. Seeing how large obligations are for social security and medicare
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- What I want to do in this video is dig a little bit deeper into the deficit
- And just so you can get the data yourself
- they are all available in this document
- which is hosted by the Department of Treasury
- so you know that I am not making up these numbers
- but just of you, the deficit is really a measure of how much
- you are overspending in any given year
- if you look at the deficit
- i am gonna focus on 2010 in this video
- In 2010, the government spent
- so the spending for the government in 2010
- was about 3.5 to 3.6 trillion dollars
- and it brought in, in mainly tax revenues
- but it has a few other sources
- mainly tax revenues, it brought in about
- 2.2 trillion dollars
- so based on this, the overspending
- or the amount of money which beyond the revenues
- or the deficit, the deficit in 2010 was 1.3 trillion dollars
- What I want to be clear on it
- this is only one way to account for spending
- verses revenues, and this is not the way most companies
- would primarily report their own income over the course of the year
- or their own cost, or their own lost
- over the course of the year
- most companies would not just have to account for their
- cash outlets, that's all we are considering in this
- 3.5 to 3.6 trillion dollars
- a traditional company would also has to include
- any other liabilities, any other obligations
- that they are taking on
- for example, if I hire you and I promise to pay you
- $50,000 over the course of next year
- and I am gonna pay them to you in cash
- But I also promised that when you retire,
- I am gonna pay you $10,000
- I am gonna give you a $10,000 per year pension
- In a traditional income statement
- I would not just expense the $50,000
- I would definitely put that in my expenses
- and government would put that in their expenses
- but I would also have to account for this liability
- that I am taking on
- I would also love to say, look, in order for me to be able to
- afford the $10,000 pension in some future day
- I have to make some estimates about when you would retire
- and how long you would live, and what interest
- I can get on money, and all of the rest
- But I have to set aside some of the amounts of money
- so that in the future I can meet that obligation
- so maybe I have to set aside $2,000 this year
- and hope it grows properly
- over the course of the next 20 30 years
- until you retire, so that I can afford to pay you that much
- who knows, but I would also have to account for, right here
- the extra liability, the government, in the calculation of the deficit
- is not account for that extra liability
- And it is taking on other liabilities
- It is making these pension promises to government employees
- It has obligations to the veterans, and veterans' affairs
- and all of that
- and that is not taking account, or that is not accounted for the deficit
- It is accounted for in the gross cost
- And you see here, we said, when we look at just the budget
- we were talking 3.5 to 3.6 trillion dollars
- that's direct cash outlets, mostly direct cash outlets
- if you include all of this other stuff
- then it ballons to 4.5 trillion dollars
- 4.5 trillion dollars, so in previous video that I mentioned,
- that the government right now, for every dollar it has spending
- it has to borrow 40 cents of that dollar
- but if you really think about the total obligations that it has
- the total obligations has to be 4.5 trillion took on
- view that way, it only has it about half of that
- it only has it about half of that coming in revenue
- so every dollar the government is taking on
- the equal obligations that year
- some of that is going to express itself in terms of increased debt
- and some of that is going to show up as increased obligations
- and you can see both of those things are increasing
- year after year after year
- And depending on who you talk to
- inside the political spectrum, some people would blame it
- on Bush, they will say, look at this, you know
- the spending increase under Obama
- or some of the right would say
- some of the left would say, yes, but
- the spending increase, because we have to do all these bailouts
- the economy went into the, start to tank
- at the end of the 2008
- we have to do all of these emergency things
- as soon as the economy tanks, you automatically
- the deficit position gets worse
- because you bring in less revenue
- And you not only bring in less revenue
- because corporate profits are down
- fewer people are employed, few people start earning less
- but you also have higher expenses
- because all of these automatic obligations came to effect
- unemployment benefits, social security benefits
- medicare benefits, those increase
- so deficit is not actually get worse
- but the whole point here is say regardless of
- what party you are on
- things are getting worse and
- they don't seem to be getting better
- And generally, you always see this net operating cost
- sometimes the net operating cost would look lower than
- the actual deficit like in 2008
- And that's because there will be some type of
- actual area of accounting
- re-estimate of the future obligations
- maybe the pension obligations, whatever
- But in most years, we are taking on more obligations
- than just our cash outlets
- That's why you see the operating cost
- so much higher than just the pure deficit right over here
- And this chart, right over here, actually goes into
- what some of those, what the difference is
- the actual difference and you see
- that is mainly things like liabilities for veterans'
- compensation, military and civilian employee benefits
- government sponsored enterprises
- there's some down division of the tarp, i don't think you can see that
- So all of a sudden, you realize that tarps gonna cost us
- more in the future than you thought it's going to be
- even though you don't spend that 86 billion this year
- you realize that you have an 86 billion higher obligation
- and so if you add all of these, or i can say,
- if you track all of these from the budget deficit
- then you are going to get the net operating cost
- and that you might already find that depressing
- But the point of this video is actually
- "that's just the beginning"
- because if you look at where we were going
- that you actually get even more depressing
- because not only do we have this huge budget deficit
- or this huge operating cost, this loss, I guess you can say
- on an annual basis, but it's gonna get worse
- it's gonna get worse not just the overspending
- not just the overspending on the government's programs
- of the defense, and all of that
- but because our debt is increasing so much
- that the interest, the amount we spend on interest
- is only going to incease
- and that just make matters worse
- the more you spend on interests, the larger deficits
- the larger deficits, the more you have to borrow
- the more you have to spend on interest
- and this is a long time line right here
- goes out to 2080, but it's pretty clear that something
- something is going to give
- so the percentage of the GDP
- the government, the size of the government has historically
- be around this, you know,depending on different periods of
- the history, but in the recent past,
- it's been the 20 percent range
- but if you just let things go the way they are gonna go
- and a lot of these kind of mandatory spending
- things we've already obligating ourselves
- to what we think we obligate ourselves to
- it looks like the size of the government is going to take over
- the economy and it's gonna grow over the next 20 30 years
- 30% 35% 40% of the entire economy
- now if that by itself is not scary or depressing enough for you
- then we just have to look at this chart right over here
- And we've already gone over some of this chart
- this is the gross cost, this is the total amount of spending
- outlets, cash outlets and other obligations
- that we are taking on and accounting for someway
- the present, and then you have the taxes
- you are bringing in, and you see this is your
- net operating cost that we calculated already
- and then chose your assets, your assets of the government
- mainly buildings and lands that the government has
- a lot of nice land and buildings
- and you also see a properly plan to the equipment to all
- that air-craft carriers whatever you want to throw
- into the mix right over here
- but then you see the debt
- and we've done a lot of talk about the debt
- you might be saying, wait, even in 2010, they don't
- you know, right now, we hit debt ceiling
- we have like 14.3 trillion, but didn't we have like
- 13 point something trillion debt in 2010
- why this only say 9 trillion
- that's because we have another 4 trillion in debt
- that is not held by the public
- this is just debt held by the public
- we have a public clews, things like foreign government
- but there's another 4 trillion that is held by the government itself
- so that is not accounted for
- and that 4 trillion is mainly excess funds for
- the social security trust that all invested in treasuries
- but the government at the end of the day is responsible for
- the social security trust, and so is not accounted for right over here
- so you have 9 trillion there
- you have another 6 trillion that is seldom talked about
- which is benefits for federal employees and veterans
- that's right over here, so huge obligation
- so a total of 16 trillion in liabilities
- now that by itself doesn't scare you enough or
- doesn't depress you enough
- we just have to go down a few lines on the statement
- and you will see something that does
- and this right here is the expected or present value of
- the obligations for social insurance
- and the way they talk about social insurance is supposed
- social security and things like medicare
- so these things we've promised we would pay the people
- in the future that we told people that we will pay them
- in the future. And the present value, the easiest way
- to think about present value, I've done videos,
- I am going to do more depth on that
- how much money given some assumptions
- if I assume that if I put money aside, that money grows
- at some rate, how much money would I have to put aside
- and in order to fund those obligations
- and this values over the next 75 years
- And I want to make it clear
- 75 years is of course gonna be huge number
- but remember, we are assuming that we can grow money
- we are assuming that obligations that are 75 years from now
- that if I have to pay someone 10 dollars 75 years from now
- I don't have to put 10 dollars aside
- I might only have to put 50 cents or dollar aside
- and assume that 50 cents or dollar will grow
- by some percentage, so that by the time 75 years go by
- I will actually have the 10 dollars
- this is actually a discounted value
- this is assuming that money you can set aside today
- the obligation today that it would grow to actual fulfill
- the actual amount you have to pay
- and this should scare you
- these are huge numbers
- this close group are what they call the current participants
- and we could read the footnotes
- includes current participants receiving an all
- edible benefits for the social security and medicare program
- ages 50 and over at the start of a 75 year of projection period
- so that's 43 trillion than open group
- they have current and future participants
- this is slightly lower because including people
- who are going to be paying into the program
- and not necessarily taking out of the program
- but is still a huge huge liability
- it's twice as big as the official liabilities
- that the government takes on
Be specific, and indicate a time in the video:
At 5:31, how is the moon large enough to block the sun? Isn't the sun way larger?
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