The Unfunded Liability Crisis on the Horizon
What Can't Continue Won't, And That's a Huge Problem for the Treasury
“When you get into debt, you become a slave.” -Andrew Jackson1
America, or at least what’s left of the historic American nation, feels under siege. Lakin Riley’s murder on the UGA campus at the hands of a twice-arrested, twice-released illegal immigrant from Venezuela2 showed that nearly nowhere is safe with the current leadership team in charge. Our woke Navy and Air Force are having trouble with the Houthis, so the Suez Canal is shut.3 American cities are reminiscent of Johannesburg,4 and our infrastructure increasingly feels like that of the Congo after the Belgians left.5
But while those issues and others are problematic, there’s a much bigger issue on the horizon: the crisis of the federal government’s unfunded liabilities, which are payment obligations it has, mainly from Social Security and Medicare, that are not funded by Congress and so the expense is lurking and will need to be paid for with tax dollars or debt in the future.6 Put simply, they’re the difference between the payment obligations of government programs and the assets set aside to pay for them.7 That difference totals $213 trillion.
In this post, we’ll discuss what America’s unfunded liabilities are, their mind-boggling scale, and why they’re likely to lead to the ruination or transformation of America.
Note: This article is a stand-alone, but in reading it, referencing our posts on the lurking issue with Social Security’s funding, how the government lies about inflation to inflate away its liabilities, and America’s hidden unemployment crisis will likely be helpful in understanding the issue. Further, our article on the West’s civilizational decay will help with understanding the mindset that led to this crisis.
$34 Trillion? Try $213 Trillion
The National Debt Since the Mid-Twentieth Century
Before explaining the unfunded liabilities crisis, a brief history of the national debt and federal spending since the mid-40s is necessary, as it will help show the scope of the titanic unfunded liabilities issue.
Coming out of World War II, the US was burdened by an immense national debt, but able to work its way out of that burden by growing the economy. As the sole industrial power not ravaged by the war, the US held a tremendous share of the world market, had the new world reserve currency, and had the gold reserves to back up that currency, thanks in no small part to British weapons spending during the war.8 So, though the fiscal burdens of the early Cold War were immense, they could be paid for and debt as a percentage of GDP dropped dramatically. That success in reducing the relative size of the national debt came thanks to real economic growth that led to general prosperity, along with a growing population from the Baby Boom. Further, the growing economy and population helped pay for FDR’s welfare programs and Social Security while pushing the debt as a percentage of GDP back down.
Things then changed in the mid-60s, with the Johnson Administration. By that point, the world’s industrial capacity had recovered from the war, so America’s share was smaller and decreasing.9 The Vietnam War was increasingly expensive in terms of not just blood, but cash. The entitlements created by the Johnson Administration added an unconscionable amount of entitlements with its Great Society programs.10
So, when the French sent a naval vessel to pick up the gold due to them, America had to renege on its debt obligations. Instead of sticking to the gold standard and paying the French what they were owed, Nixon broke the bonds of fiscal restraint and took America off the gold standard. Afterward, the government could print any amount of money required rather than only the amount that could be backed by gold in its possession.11 Carter’s presidency was a malaise-filled mess12 because of the resultant inflation, and Reagan then redlined the economy with debt to drag America out of that malaise. He succeeded in bringing positivity and economic growth back, but at the cost of tripling the national debt.13
Since Reagan broke the spell of self-imposed (rather than gold-imposed) fiscal responsibility, presidents have been spending like drunken sailors. HW spent so much that he had to raise taxes despite the “peace dividend” from the end of the Cold War.14 Clinton was saved by the Internet Bubble and post-Gulf War drawdown, but was hardly a fiscally responsible cost-cutter.15 Bush spent unprecedented sums on the War on Terror while also expanding welfare programs,16 and Obama nearly doubled the already massive national debt.17 Trump then spent enough to make his predecessors look prudent, one of the biggest problems of his presidency. Biden has been even worse, with the deficit an unprecedented $1.7 trillion in 2023, one outdone only by the spending of the Covid years.

As a result of presidents putting even spendthrifts to shame, the national debt is now nearly $35 trillion dollars. As the below graph, provided by the Treasury, shows, it has risen exponentially since the Reagan presidency:

Admittedly, the graph is not inflation-adjusted. So, to put the debt in better context, here’s what the national debt looks like over time as a percentage of GDP:
It rose during World War II and fell as the economy boomed after the war. Then things started to change as welfare and war spending picked up in the 70s, when the decline in it as a percentage of GDP stopped at around 30%. Since then, then debt has been on a near-continuous rise as a percentage of GDP. Now, despite America generally being at peace and the economy muddling along, it’s at a higher percentage of GDP than ever.
Further, at about $34.3 trillion, that means every American owes nearly $100,000.18 Yet worse, the debt continues to grow like Jack’s beanstalk, so by 2028, the debt will likely grow to 150% of GDP instead of today’s 122%. That, in turn, means each American will owe closer to $132,000, and the money spent on the interest alone will have outclipsed military spending.
The National Debt is Just the Tip of the Iceberg
A $34.3 trillion national debt is disastrous. However, no matter how much worse it gets by 2028 or 2030, the unfunded liabilities of the federal government dwarf it and are increasing at an even faster clip. So you can see the two side by side, here’s the debt clock, including unfunded liabilities (current national debt is in the top left corner and unfunded liabilities are in the bottom right).
As can be seen in the above debt clock graphic, between all of America’s welfare and entitlement programs, but mainly Medicaid and Medicare, and Social Security, the unfunded liabilities of the federal government are well north of $200 trillion dollars, probably in the $213 trillion range, and are rapidly rising. As an opinion contributor to The Hill noted in a January 2024 op-ed19:
The U.S. government’s total unfunded liabilities — the combined amount of payments promised without funds to recipients of Social Security, Medicare, federal employee pensions, veterans’ benefits and federal debt held by the public — stand at $212 trillion, and are rapidly increasing. For context, that number was just $122 trillion as recently as 2019 and is projected by the Debt Clock to reach $288.9 trillion by 2028.
That is an unimaginable amount of money — more than a quarter of a quadrillion dollars. When or if the government is forced to reduce payments, pensions or services to hold things together, or to default on its debt, the consequences will be brutal.
That means the current unfunded liabilities total more than $600,000 per American right now, and will be over $800,000 by 2028. In 2030, it’ll be closer to $1 million. What that means is that to pay for entitlement spending, the government will need to squeeze $800,000 tax dollars out of every American, on average, to pay for them. Very few Americans can pay such a tax bill, even over their lives, so that means the level of spending is unrealistic. The government will have to raise taxes dramatically, slash the programs dramatically, or inflate the currency away by issuing ever vaster amounts of debt, much like Weimar Germany in the 1920s.20
Those “solutions,” in turn, create problems because nearly all of the unfunded liabilities problem (95%) comes from Medicare and Social Security.21 So, to pay for them, either young people will be taxed to pay for handouts to those in retirement (the Social Security money is long gone)22 or those relying on Medicare and Social Security in retirement will find themselves penniless. Neither option is politically palatable, hence why the issue has been kicked down the road and grows year by year.
Admittedly, the problem is somewhat smaller when discounted for inflation. Such is what the Cato Institute noted in a 2022 report, saying:23
Over the next 75 years, the U.S. government’s unfunded obligations total $79.5 trillion. Over the next 75 years, the unfunded obligations are the difference between the present value of projected non‐interest spending of $430.2 trillion (see Figure 1) and the present value of total receipts of $350.6 trillion over the same period. Present value means that future cash flows have been discounted to adjust for expected inflation and interest rates, recognizing that one dollar today is more valuable than one dollar tomorrow. The discount rate reflects the expected rate of return taxpayers could have received over the next 75 years if they invested the 2022 value.
Still, even if smaller, the number is still tremendous, more than double the current national debt even in present value terms. Further, it has been increasing dramatically in recent years. Such is what the American Enterprise Institute noted in a 2021 report on the unfunded liabilities issue, even excluding Social Security and Medicare, providing:24
In 2001, the Treasury estimated the government’s net unfunded liabilities, in present value terms, at $6.5 trillion, or 61 percent of GDP, with federal debt accounting for $3.3 trillion of the measured obligations. By 2011, the estimated net unfunded liabilities of the federal government had grown to $14.8 trillion, or 95 percent of GDP, which represented a deterioration of $8.3 trillion over a decade. Over that same period, federal debt rose by $6.9 trillion and non-debt unfunded liabilities by $1.4 trillion.
By 2021, the government’s net position had deteriorated to minus $29.9 trillion, or 128 percent of GDP, with federal debt accounting for $22.3 trillion of the liabilities. The government’s unfunded commitments beyond public debt had grown by $2.9 trillion over ten years.
Benefits owed to federal employees and veterans figure prominently in this worsening outlook. Future retirees and current service members are earning rights to benefits that exceed the funds being set aside to meet the obligations. In other words, the government continues to make unfinanced benefit promises that will increase the tax burden on future generations of workers.
AEI also noted that any major reforms of the problematic entitlement programs would be politically unpalatable at best despite those programs being the ones to blame:25
The financial hole is actually deeper than these numbers reveal because they exclude the dramatic effects of Social Security and Medicare, which is regrettable because American workers fully expect the government to honor the benefits they are earning with their payroll taxes. Indeed, a major reason reforming these programs is so challenging is that political leaders mostly agree with workers that these programs represent a social contract that deserves a special and protected status in the political process. While Congress retains the right to adjust benefits under these programs at any time, the reality is that voters enforce a more restricted view of what elected leaders can change.
In summary, America is burdened with an extensive entitlements scheme that is unfunded to the tune of something in the $80 trillion range (~2.35x the national debt) in present value terms and $213 trillion (~6.2x the current national debt) in nominal terms. Yet worse, those unfunded liabilities have grown rapidly in recent decades, going from about 61 percent of GDP in 2001 to about 370% of GDP in 2024 (the unfunded liabilities’ present value of $85 trillion/current GDP of $23 trillion), with the issue getting larger by the year. That is too large to ever be paid, which means the government will either resort to out-of-control inflation that wipes away the unfunded liabilities problem and replaces it with a hyperinflation problem, or some form of austerity that raises taxes while slashing entitlement spending to the bone.
This Isn’t a New Issue, Nor Is It Easily Solvable
Of course, this didn’t come out of the blue. Those paying attention to the national debt and the massive extent of the federal government’s entitlement programs have been ringing the alarm bells for decades now. Ron Paul, for example, has been warning of the coming crisis’ proportions for many years, and numerous Republicans, such as Dr. Ben Carson in 2016, have pointed to it being a problem.26
Yet, despite their warnings, nothing has been done. The Social Security age has not been revised upward, Medicaid and Medicare continue to expand, and raising taxes to pay for the out-of-control programs is as much political poison as cutting benefits. As a result, the unfunded liability has grown daily in nominal terms, inflation-discounted terms, and as a percentage of GDP.
That’s a massive problem. Eventually, something will give. Either taxes will rise dramatically to claw that ~$1 million per American average out of taxpayer pockets and into the gaping maw of government, or benefits will be slashed to make the programs fiscally sound(er). Whichever of those poisonous policies is chosen, or even if both are chosen, the near-certain attendant policy will be one of inflating away the currency to make the program costs more bearable. Though Social Security is technically indexed to inflation and so adjusts automatically, that is based on CPI. As discussed in our article on CPI, the government can and does minimize that number to escape its debt burden and program liabilities. Expect that to continue when the crisis comes and the government has to figure out how to handle these programs.
What that means is the environment America is headed into is all the more dangerous because of the unfunded liability powderkeg lying underneath it. While the foreign situation degrades and the economic environment deteriorates, the government will have to decide what to do, particularly as the Baby Boomer generation starts retiring en masse and Social Security is hit by the dual issue of fewer people contributing and more drawing on its coffers. Given that it is already near-insolvent27 and a major portion of the unfunded liability problem, it will be the cause of much fighting as America balances the needs of its seniors with what will likely be the refusal of young people to bear an increasingly heavy tax burden to pay for their retirements. Paired with that will be steady inflation, about which the government will be lying in an attempt to inflate away its liabilities, further reducing trust in government and degrading the economic environment.
Read Ivan Smith’s “Mad Dog Killers” to learn about that travesty. Long story short, everything fell apart because of neglect, incompetence, and theft.
Yes, this means Social Security is dramatically underfunded, as discussed in our article on Social Security. The money you paid into Social Security is not sitting in a government account waiting for you. It has been spent, and the money making up the difference between payouts and inflows is rapidly decreasing. Soon, it will be a vast transfer payment, welfare system like any other.