Now that the calculations for our Financial State of the Union, which are based upon information in the recently released Financial Report of the U.S. Government (FRUSG) for the fiscal year ended September 30, 2020, are complete, we have found that we need to adjust our debt clock. The good news is the clock’s “true debt” decreased.
Because large amounts of unfunded Social Security and Medicare promises make up a significant part of our true debt calculations, changes in the assumptions used to calculate these liabilities cause large fluctuations in our estimates.
Prior to March 2021, the last time we updated the debt clock was based upon the 2020 Social Security trustees’ report. The trustees estimated the January 1, 2020 liability increased from $16.8 trillion to $19.7 trillion for what is called the “open” group, which includes both current and future participants. We do not believe that the liability amount should include revenues and expenditures of future participants, so we determine the “closed” group liability. The closed group only includes current Social Security participants. Based upon the prior year’s ratio of the open group as a percentage of the closed group (44.68 percent) we estimated the closed group liability on January 1, 2020 was $44.1 trillion. Information presented in the latest FRUSG indicats that this percentage changed to 47.82 percent. Using this new percentage the January 1, 2020 Social Security estimate for the closed group liability is $41.2 trillion. This means that legislative, demographic and economic assumption changes had a higher than expected negative impact on revenues and expenditures for future participants than they did for current participants.
Our unfunded Medicare liability estimate is based upon what the trustees call the “Illustrative Alternative Scenario,” (IAS) which reflects a more realistic benefit structure. The IAS is reported in the FRUSG, not the trustees’ report. Therefore when we updated the debt clock based upon the January 1, 2020 trustees’ report we had to estimate the IAS that would be reported in the September 30, 2020 FRUSG based upon the prior year IAS compared to the 2019 trustees’ amount. This estimate was $57.1 trillion, but the IAS reported in the latest FRUSG was $55 trillion.
The degree of growth in non-Social Security and Medicare debt was also lower than we estimated.