According to USA Today, the sum of all U.S. personal and federal government obligations is now $63.8 trillion, or $668,621 per American household:
- $121,958 of the total are personal obligations – mortgages, credit cards, student loans, etc.
- $546,668 are federal government obligations – Medicare,SocialSecurity, retirement benefits, etc.
These are scary sounding numbers (as the 3000+ comments on the USA Today story indicate), but there seems to be some misunderstandings about what they actually mean. The truth is that our financial obligations are very different from the more commonly discussed “national debt,” which is a relatively manageable $11.3 trillion. National debt is the amount the government currently owes creditors due to budget shortfalls. But government financial obligations are guarantees the government has made (including national debt held by creditors) that will have to be paid out at some point.
Most of what is guaranteed will already be covered by the existing tax structure. But it’s the obligations that will not be covered by future tax revenues that are really the issue here. Paying for them is going to mean raising taxes or reneging on obligations, and no one is likely to support doing either.
As far as personal obligations go, the average sum of $121,958 per household is mostly accounted for by mortgages. If you have a reasonable interest rate and a job, this is relatively good debt to have. So, much like the federal government, having a lot of financial obligations may not be a bad thing – assuming you will have the means to pay them off.
Finally, a small word of warning when reading statistics: Oftentimes there are assumptions made and details left out that can radically alter their importance. For example, in the USA Today statistics above, what timeframe are the obligations within? Does this include social security and Medicare obligations up to 20 years out? 50 years? 100 years? If 100 years, then $63.8 trillion would obviously be much more reasonable.
