Is the US Government Bankrupt?

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Standard and Poor’s may seem to think so. After all, the reputed rating agency downgraded the US government’s credit rating from AAA to AA+, an act that drew plenty of protests from politicians. Recently, the New York Times reported that the Justice Department has been investigating the business practices of Standard and Poor’s, a process that has been going on since 2008 when the rating agency highlighted the sorry state of the country’s mortgage securities that resulted in the sub-prime mortgage crisis that year. Apparently, the investigation has intensified in the last few weeks and its focus has also changed.

However, it is surprising that our politicians are dissatisfied with S&P’s evaluation of the credit rating of the country when the amount of public debt is plain for all to see. The US government owes $14.5 trillion and long-term entitlement liabilities of over $100 trillion but taxes collected amount to only $2.2 trillion per year, which goes to pay salaries of all government servants, maintenance of all public assets and funding government projects. How do we even begin to pay off any part of that mountainous debt?

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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