Tuesday, July 13, 2010

In The Hole

The current amount of government debt -- $16 trillion in bonds and other securities and $109 trillion in unfunded commitments to programs like Social Security and Medicare -- is too staggering to grasp.
Ken posits a family of four living in Richmond and making $125,000, which he says is the median income for an American two-income professional couple. This hypothetical (I assume) family owns a home worth $450,000 on which it owes $266,000. It also owes $34,000 in loans on two cars.

Finally, the couple has savings and investments that add up to $76,000.

The young couple believes its net worth to be about $270,000, the amount by which its assets exceeds its liabilities -- the debt on the house and the cars. But this calculation fails to consider the household's portion of federal, local, and state debt and unfunded government financial commitments.

That amount, according to Ken, is $1,069,100. If it's considered a liability, the family is suddenly almost $800,000 in the hole.