It’s not a secret; the United States is saddled with debt. But how much debt the Nation owes depends upon whose accounting you use.
Currently, the Treasury reports $16.74 trillion in outstanding debt. About $4.84 trillion of that debt the Nation owes to itself in the form of liabilities such as Social Security, so many analysts say that the Nation holds about $11.91 trillion in publicly traded debt.
Trillions of dollars in debt sounds bad enough, but University of California-San Diego economist Professor James Hamilton says the debt that the Nation owes “off the books” is actually six times greater than the publicly reported financial burden.
The unaccounted debt Hamilton cites is comprised of off-balance-sheet liabilities that are not included in the government’s officially reported numbers. Specifically, those liabilities relate to the Federal government’s “support for housing, other loan guarantees, deposit insurance, actions taken by the Federal Reserve, and government trust funds.”
In a study of those liabilities, Hamilton estimates that a true accounting of the Nation’s debt would reveal that American taxpayers are on the hook for a debt burden of more than $70 trillion.
The largest chunk of the Nation’s actual debt, according to Hamilton, is the cost of Medicare and Social Security, which inflate the national debt by $27.6 trillion and $26.5 trillion respectively.
“The US population is aging, and an aging population means fewer people paying in and more people expecting benefits. This reality is unambiguously going to be a key constraint on the sustainability of fiscal policy for the United States,” Hamilton said. “One would think we should be saving as a nation today as preparation for retirement, and if in fact we are not, the current enormous on-balance-sheet federal debt is all the more of a concern.”
Here are some of Hamilton’s other findings about the unreported national debt:
- Government sponsored entities such as Fannie Mae and Freddie Mac, which were nationalized during the financial crises, contributed $6.2112 trillion to the unreported national debt.
- Government-sponsored mortgage value guarantees to investors contribute $1.408 trillion.
- The Federal government is currently responsible for the guarantee of $325 billion in student loans and small-business loans.
- The Federal Deposit Insurance Corp., the government-backed insurance scheme that protects small depositors, contains only about $33 billion in funding from member fees. The full value of FDIC-backed deposits is $7.406 trillion.
The Federal Reserve
- Fed policy accounts for about $1.128 trillion in unrecorded debt.
Government Trust Funds
- Trust funds such as the Civil Service Retirement and Disability Fund and the Military Retirement Fund make up about $1.86 trillion in unreported Federal debt.
Hamilton’s debt estimate sounds about as bad as possible, but some economists argue that his numbers are too low. Boston University economics professor Laurence J. Kotlikoff recently came up with an off-the-books debt number three times higher than Hamilton’s.
“If you add up all the promises that have been made for spending obligations, including defense expenditures, and you subtract all the taxes that we expect to collect, the difference is $211 trillion. That’s the fiscal gap,” Kotlikoff told National Public Radio. “That’s our true indebtedness.”
Of course, if you’ve been a fan of Personal Liberty Digest ™ for any amount of time, you already knew all of this: We’ve been telling readers for years that the United States’ true debt is in the hundreds of trillions of dollars.
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