Your $455,000 loan to Uncle Sam

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Were a family to go out and borrow $455,000 on an adjustable interest rate to buy a big second home with no idea where they were going to get the money to pay it off, they would justifiably be seen as fools.

They certainly would not deserve a bailout from hardworking taxpayers who had been prudent stewards of their own earnings and savings.

Thanks to the compounded negligence of four successive generations of politicians in Washington, D.C., however, every family in America is now on the hook for $455,000 over and above what they owe on their own mortgage, or student loans, or credit cards or can expect to pay in taxes under the current tax system.

This is largely because of the middle-class welfare state initiated by President Franklin Roosevelt, expanded by President Lyndon Johnson, expanded again by President George W. Bush, and generally maintained and nurtured by all presidents and Congresses in between.

Comptroller General David Walker, who heads the Government Accountability Office, testified Jan. 29 before the Senate Budget Committee. His subject was the unfunded liabilities Uncle Sam has incurred on our behalf through already promised entitlements in programs such as Social Security, Medicare and the veterans benefits. These liabilities now exceed by $53 trillion the tax revenues projected to be available to pay for them.

"I know it is hard to make sense of what 'trillions' means," Mr. Walker said. "One way to think about it is this: Imagine we decided to put aside and invest today enough to cover these promises tomorrow. It would take about $455,000 per American household — or $175,000 for every man, woman and child in the United States."

Of course, every man, woman and child does not work for pay outside the home. Some are too young. Some take care of their own children. Some are criminals who have actually been locked up in jail. Some are ill or incapacitated. And some are just lazy.

When you divide the unfunded costs of promised entitlement benefits by the number of Americans who work full time, says Mr. Walker, it equals $410,000 per worker.

A married couple making $80,000 per year would have to set aside all their income for more than five years to cover their share. They cannot do that, of course, because they are already paying a significant part of their annual earnings in federal income taxes, Social Security and Medicare taxes, state income taxes, property taxes, sales taxes and excise taxes. Also, they need what is left over after all these taxes to pay their living expenses.

But then, the elected officials in Washington, D.C., have no intention of making Americans working today pay for the entitlement benefits these elected officials are promising to deliver. That would destroy one of the primary incentives politicians have for making these promises, which is to make the voters think that, on net, the politicians are giving them things rather than taking things away.

We can see this incentive working in the last presidential election cycle as well as this one. In December 2003, just before the 2004 election year, President Bush signed into law Medicare Part D, the prescription drug entitlement. It is now a tidal wave forming on our fiscal shore. "In fact," Mr. Walker told the Budget Committee, "the federal government's obligations for Medicare Part D alone exceed the unfunded obligations for Social Security."

In this election cycle, debate in the Democratic primary has focused on whether Hillary Clinton or Barack Obama has a better "universal health care plan." Rather than limit health insurance as a government entitlement for the poor and the elderly, they would make it an entitlement for everyone.

Who would pay? Almost certainly much if not all of the cost will be added to the $410,000 in obligations Uncle Sam has already laid on the shoulders of every full-time worker — and, if the politicians can manage it, those workers will pass it on in one big bundle to their children.

In 1930, before Franklin Roosevelt started building the middle-class welfare state, federal taxes took in 4.2 percent of the gross domestic product and federal spending consumed 3.4 percent of GDP, leaving a surplus. In 2009, federal taxes are projected to take in 18 percent of GDP, with spending at 20.7 percent of GDP, meaning government will need to borrow 2.7 percent of GDP to cover expenses. Mr. Walker's GAO estimates that on the current path annual federal deficits will reach 20 percent of GDP around 2040.

Some day, Americans will look back across the wreckage of our coming fiscal catastrophe and ask: Why didn't our leaders see it coming?

The answer will be: They did.

Terence P. Jeffrey is the editor in chief of CSNnews.com and is a nationally syndicated columnist.