Economist Says Real U.S. Debt $70 Trillion
August 21, 2013
The federal government has been low-balling the public for years on how much debt it actually has, a University of California, San Diego, economics professor says, adding that the real amount is $70 trillion -- not $16.9 trillion. James Hamilton's claim that the United States is in a much deeper financial hole than many realize comes as Congress gets ready for another budget battle when lawmakers return in September. Both sides have been digging in on their policy positions over the debt, spending and the country's future fiscal health, says Fox News.
- Hamilton believes the government is miscalculating what it owes by leaving out certain unfunded liabilities that include government loan guarantees, deposit insurance and actions taken by the Federal Reserve as well as the cost of other government trust funds.
- Factoring in those figures brings the total amount the government owes to a staggering $70 trillion, he says.
Hamilton believes important areas of federal off-balance-sheet commitments include loans for post-high school education, the Federal Deposit Insurance Corporation and the Federal Reserve System.
- Hamilton isn't the first economist to say the government understates how much it owes.
- Claims that the real liability facing the government is $70 trillion date back several years.
- David Walker, former U.S. Comptroller and CEO of the Comeback America Initiative, made similar claims in 2012. Walker's calculations include unfunded Social Security, Medicare and retiree pension promises.
- Boston University economist and NCPA Senior Fellow Laurence Kotlikoff and financial writer Scott Burns warned in a 2008 Forbes article about what could happen if the government doesn't curb its spending.
"The earthquake will come via a collapse in the market for U.S. government bonds as domestic and foreign investors realize that the only way Uncle Sam can meet his future spending obligations is to print massive quantities of money," they said. "The result will be sky-high inflation and interest rates and, most surely, a prolonged reduction in output and employment. This could happen today. It could happen tomorrow. But it will happen here just as it has happened in every other country that tried to spend far beyond its ability to pay."
Source: "California Economist Says Real U.S. Debt $70 Trillion," Fox News, August 15, 2013.
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