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Aug 12, 2013

Study: US debt six times greater than declared - $211 trillion

...The real shocker in the report, however, came with the cost of Medicare and Social Security, which ran at $27.6 trillion and $26.5 trillion respectively.   

Hamilton could not conceal his surprise at the findings.

"These numbers are so huge it is hard even to discuss them in a coherent way," he said before providing a caveat on the US demographic situation. "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.

"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."

It is not just the sick and elderly, however, who are adding to the US debt burden. Government loans for students also featured high in the report.

The US Department of Education approved $714 billion at the end of 2012, which is a significant jump from the $104 billion issued at the end of 2007.  But with the US economy failing to generate new jobs, many of these now college graduates lack the financial means to return their debt.

Although the report paints an extremely worrisome picture of America's fiscal situation, some say it may actually be overly optimistic.

The US debt burden is much greater says Boston University economics professor Laurence J. Kotlikoff, who served on President Ronald Reagan's Council of Economic Advisers.

"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 said in an interview with National Public Radio. "That's our true indebtedness." Please continue reading at: