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June 07, 2006

The long run budget gap

The federal government has been running a budget deficit for several years, and the national debt keeps climbing. But N.C. State University's Mike Walden says there is a much more challenging fiscal problem facing the federal government.

"If you ask economists about the budget deficit and the national debt, they will say, 'Well, yeah, those are important. But they are not the big issue. The real big issue is what economists call the unfunded liabilities of the big social programs we have, and the two biggest programs are Social Security and Medicare.

"Now an unfunded liability simply means you project out what you are going to spend from those programs, you project out the revenues that are available to fund that spending, and you see a big gap.

"And, in fact, that gap has been estimated for the rest of this century for those two programs at over $40 trillion.

"So this is the real gap -- financial gap -- that economists worry about. And it is likely going to mean that at some point, some point, we are going to have to make major adjustments in both of those programs."

Posted by deeshore at June 7, 2006 08:00 AM