Federal Liabilities: 2017 Update

Abstract

The official federal liabilities of the United States federal government totaled $22.8 trillion as of September 30, 2016. They include the debt held by the public of $14.2 trillion, federal employees; accrued retirement benefits of $7.2 trillion, and various other categories round out the remainder. Not included in the official liabilities is a measure of accrued Social Security and Medicare benefits expected by workers and retirees even though these benefits are conceptually equivalent to federal employees; accrued benefits. Accrued Social Security and Medicare benefits are not included as liabilities because workers and retirees do not have a legal claim to the receipt of these benefits. However, we suggest adding a subset of these accrued benefits to the official liabilities. Specifically, the portion of accrued benefits payable to retirees are likely to be paid in full and they meet the definition of liabilities in that they are based on prior actions that will require future resources. This subset of benefits payable to retirees appear each year in the Financial Report of the United States Government in the Statements of Social Insurance, but not as liabilities. Social Security and Medicare benefits payable to current retirees produce an additional liability of $19.8 trillion, an amount that exceeds the debt held by the public and that is 87% of the size of the official liability measure. Together the official liabilities and the Social Security and Medicare benefits to be received by current retirees total $42.6 trillion, or 229% of GDP. This liability measure, combined with the forward-looking fiscal gap and unfunded obligation measures, provide policymakers with a comprehensive set of metrics that distinguish between existing federal commitments based on past actions and those that are contingent on continuing the programs in their current forms.