The fact that economics tell us to discount — as in make less of — each dollar owed or received in the distant future, however, doesn’t mean a government can ignore those obligations and receipts, especially if there are loads of future obligations relative to receipts.<\/p>\n
Take the just-released 2013 Trustees Report on Social Security’s long-run finances. Table IVB6 shows an infinite horizon fiscal gap of $23.1 trillion separating the Social Security system’s projected costs and taxes after taking into account the several trillion in the Social Security trust fund. To give you a sense of how massive this shortfall is — and it grew by fully 8 percent last year alone — it is 50 percent larger than U.S. GDP and almost twice the size of total federal debt held by the public.<\/p>\n
Table IVB6 also reports Social Security’s fiscal gap over the next 75 years. It’s much smaller — only $9.6 trillion, and that’s the number people tend to use in discussion. But that number is only 41 percent of the actual economic gap: $23.1 trillion. Thus, the 75-year fiscal gap hides three fifths of the system’s true long-term shortfall.<\/p>\n