Author(s): Amy Cardillo, Christine Kuglin JD, Bill Shaw
This case study introduces accounting students to the various reporting methods of United States debt and entitlements. As of April 2024, the reported U.S. public debt is $27.5 trillion, encompassing various domestic and international holders. The Federal Reserve plays a significant role in purchasing Treasury securities and injecting funds into the economy, which, without corresponding growth, risks inflation. Trust funds like those for Social Security and Medicare, which track earmarked receipts and expenditures, invest surpluses in non-marketable Treasury securities. These funds, although accumulating interest, face depletion within the next decade, necessitating significant reforms to ensure sustainability. The Social Security trust funds, holding $2.8 trillion at the end of 2023, are projected to be depleted by 2034 without reforms. Financial reporting of U.S. debt varies significantly across sources. The federal balance sheet reports $37.5 trillion in debt, but excludes trust fund liabilities, while comprehensive analyses by entities like Truth in Accounting estimate total federal obligations (debt and related entitlements) at $159.3 trillion. This discrepancy arises from differences in methodologies.