When Mitt Romney traveled around the country campaigning recently, he brought a debt clock with him showing the rising national debt.
The total is a mind-boggling, massive number. In St. Petersburg, Fla., on May 16, 2012, Romney explained what the debt and "unfunded liabilities" means for every household.
Romney said unfunded liabilities "means promises made by the federal government where there is no money behind it to pay it. … So it's the liabilities (that) add up to, think about this, $520,000 per household. …And this president hasn’t stopped it; he has added to it."
Wow -- every family owes more than a half-million? Forget about ever paying that off -- right?
We wanted to check if Romney, the presumed Republican nominee for president, was correct that the amount of debt plus unfunded liabilities equals about $520,000 per household.
We’re not going to consider responsibility for the debt in this report; both Republicans and Democrats have been responsible over the years. Here, we want to look at whether the number is an accurate reflection of how much debt we have.
The Romney campaign pointed us to a 2011 news analysis in USA Today. "The $61.6 trillion in unfunded obligations amounts to $528,000 per household," it said. "That's more than five times what Americans have borrowed for everything else — mortgages, car loans and other debt. It reflects the challenge as the number of retirees soars over the next 20 years and seniors try to collect on those spending promises."
USA Today provided a breakdown of money owed, based on 2010 figures.
• Medicare: $24.8 trillion. "This demographic burst — combined with the addition of a prescription drug benefit in 2006 and rising health care costs generally — has created an unfunded liability of nearly $25 trillion over the lifetime of those now in the program as workers and retirees."
• Social Security: $21.4 trillion. "Social Security's long-term shortfall grows about $1.2 trillion annually — a sign of an imbalance between the number of young workers and older beneficiaries, according to the Social Security trustees' annual reports. The $21.4 trillion unfunded liability represents the difference between all taxes that will be paid and all benefits received over the lifetimes of everyone in the system now — workers and beneficiaries alike."
• Federal debt: $9.4 trillion. This has grown since the USA Today report. The U.S. Treasury put the debt at about $15.677 trillion as of May 14.
Defining an unfunded liability
Our main concern with Romney’s statement is that it counts obligations to be paid in the future as debt for today’s families. This might sound reasonable, but thinking of debt this way presents some tricky issues.
What Romney did was take the amount predicted that we will owe over the next 75 years for Social Security and Medicare, subtracted what we will take in to fund them, and then divided that sum by the current total of households.
Technically, though, shortfalls in Social Security and Medicare aren’t unfunded liabilities, said J.D. Foster, an economist with the right-leaning Heritage Foundation. "Legally, they are not liabilities. They can be referred to accurately as promises or obligations." (He spoke with our sister site PolitiFact Virginia last year on the same topic.)
Foster said the benefits do not qualify as liabilities because Congress can change the terms of Medicare and Social Security at any time.
Foster told us in an email for this article that Romney’s calculation is valid. However, the figures for unfunded promises differ from common debt.
Gary Burtless, an economist with the centrist Brookings Institution, also pointed out that future benefits for entitlements are not "owed" to seniors in the same way that the public debt is owed to the people and institutions who purchased U.S. government debt.
"Congress can and almost certainly will reduce the future benefits promised to people who will receive Medicare and Social Security in the future," Burtless said via email. "Moreover, even if Congress does NOT act before the Trust Funds are depleted, under current law Social Security and Medicare beneficiaries would receive less than the amount of benefits provided to current beneficiaries.
"Why? Because the Secretary of the Treasury can only pay for those benefits out of the Trust Funds, and if the Trust Funds are depleted of cash, the rate of spending out of it will be limited to rate at which the Trust Funds are replenished with tax revenues flowing in under the current tax schedule."
Michael Linden, of the liberal Center for American Progress, said it’s silly to divide our current debt by the number of households because no one suggests that we equally apportion the debt and pay it all off tomorrow.
"How does it make sense to apply potential debt borrowed in 2085 to families today?" he asked.
Linden also said that while it’s true that revenues for Social Security and Medicare are projected to fall short of meeting needs over the next several decades, the U.S. will also face the obligation to pay for trillions of dollars on defense over the next 75 years.
"That’s because the real worry is not the gap between spending and revenue in any given program (even those that are supposed to have dedicated revenue streams), but the gap between overall spending and overall revenues," Linden said via email. "So my bottom line is that, while Mitt Romney’s math may be right, his implication is wrong, and his number is devoid of any actual meaning."
Still, Romney’s underlying point that there is a fiscal imbalance is sound.
Alan Auerbach, an economist at Berkeley and research associate at the National Bureau of Economic Research, said that by the numbers, Romney’s calculation is pretty much on target based on the government’s own projections. Auerbach said he has done similar calculations.
"I would and do call these unfunded liabilities," he wrote in an email. "They differ from our explicit national debt liabilities in that we can reduce them by undertaking policy reforms, but under current policy they are indeed unfunded commitments. That is, they are obligations in excess of their dedicated funding sources (payroll taxes, premiums paid by Medicare enrollees, etc.)."
Romney said that the debt and unfunded liabilities of the federal government adds up to $520,000 per household. Romney relied on a 2011 article in USA Today that added up the debt at that time and the amount owed for entitlements -- the largest one was the amount owed for Medicare.
Most economists we spoke with disagree with calling the amount we will owe in the future for entitlements "unfunded liabilities," because the government has the power to change the programs, either by reducing spending or increasing taxes. Those obligations are different than our current debt.
But Romney’s underlying point is true: Without significant changes, we are on track to owe a mind-boggling sum if we spend large sums without sufficient revenues. We rate this claim Half True.