On Thursday, Elon Musk, CEO of Tesla and SpaceX and – at current stock prices – the richest person in history, stated the following on Twitter. To most, it probably sounded alarming; but the reality behind Musk’s words is not at all alarming. And the fact that Musk does not understand this makes it clear that he is incredibly ignorant of the US economy and eligibility programs:
The true national debt, including unfunded rights, is at least $ 60 trillion – about three times the size of the entire U.S. economy. Something has to give.
– Elon Musk (@elonmusk) February 11, 2022
Where did Musk get this $ 60 trillion figure from? What does it mean?
The first question cannot be answered definitively as Musk did not say and did not answer when asked on Twitter. But you can be pretty sure it comes from the government 2021 report on the status of social securitywhich stated that the program’s “unfunded commitment through the infinite horizon” in current dollars is $ 59.8 trillion.
That does not mean Musk himself discovered this while flipping through the 270 pages of the report. He’s more likely to have picked it up from the dozens of news stories that mentioned Social Security’s unfunded commitments when the report came out, or something similar. this blog post from the Cato Institutea libertarian think tank in Washington, DC. Most likely it is that he has just heard it from someone at a party.
In any case, the figure is $ 60 trillion, and it certainly sounds scary. Sixty trillion dollars is a lot of money! As Musk says, that’s about three times the size of the U.S. economy, which was $ 23 trillion in 2021.
But if you understand what’s going on here, it’s not scary at all.
“Unfunded liabilities” are the difference between Social Security’s current expected income and its current expected promised benefits. If these projections are correct, taxes will have to be raised by $ 60 trillion, otherwise benefits will have to be cut by that amount, or a combination of the two.
But then there is the part “through the infinite horizon”. That means $ 60 trillion is Social Security’s unfunded liabilities between now and the end of time.
In other words, we do not have to come up with $ 60 trillion right this second, as suggested by Musk’s comparison with the current US economy. We have infinitely much time to pay for this – or more conservatively, 5 billion years, when the sun will turn into a red giant and devour the Earth, at which point we will have bigger problems than Social Security.
The same government report that gives the figure $ 60 trillion also gives us on the same page the cumulative expected gross domestic product of the United States through the infinite horizon. That’s $ 4.237 trillion. This means, as the report says, that $ 60 trillion is 1.4 percent of US GDP in the relevant time frame.
That is it. That’s what Musk is saying, even though he certainly does not understand it himself: We will have to invent a tiny part of the US economy to pay in full for social security benefits. Once you understand this, your reaction will be the exact opposite of what Musk hopes: Who cares?
Diagram: Social Security Trustees
That’s most of the story, though not the whole thing.
A sensible person may ask whether humans can accurately predict the future over the next hundred, thousand, or million years. The answer, of course, is that we can not.
So why does the Social Security report do that? The number of infinite horizons was first included in the annual Social Security report in 2003, thanks to pressure from the right wing, which was hoping to see the program cut or wound up. Then head of what was then called the Social Insurance Committee of the American Academy of Actuaries wrote to the Social Security’s trustees that “the new measures of OASDI” – an abbreviation for the Old-Age, Survivors, and Disability Insurance program – “unfunded commitments included in the 2003 report provide little or no useful information on the long-term economy of the program and in fact mislead anyone who lacks technical expertise. “
That’s the answer: The infinite horizon projections are there to fool ordinary people.
Even more amusing is that social security is not the only eligibility program with unfunded commitments. Medicare has even more: $ 103 trillion. That means Musk should have tweeted about $ 163 trillion in unfunded liabilities. In other words, he knows so little about this that he can not even put his best propaganda foot forward.
In any case, Musk’s ignorant chatter illustrates how the people at the top of American society are just repeating what are basically billionaire city legends, while having absolutely no idea what they’re talking about. That’s how they got us into a giant war with Iraq based on a fantasy, almost destroyed the world economy in 2008 and left nearly a million of us so far dying of coronavirus. (Musk yourself wisely tweeted in March 2020 that “there would probably also be close to zero new cases in the US by the end of April.”) If we allow them to continue operating in their dream world, they will, filled with confidence, lead us into in even more frightening disasters.