Kotlikoff: "The government is lying about the national debt; It is engaging in Enron accounting"
THE REAL NATIONAL DEBT: $14 Trillion, $60 Trillion, or $200 Trillion -- Does anyone know what the U.S. really owes?
You have to admire Kotlikoff for telling the truth:
---
Reprinted with permission.
While the official number -- $13.4 trillion, according to the Congressional Budget Office -- is frightening enough, some analysts say the actual figure is much, much higher. Like a shopaholic who hides their credit card bills, the government pretends certain obligations and expenditures don't exist. Uncle Sam really owes closer to $60 trillion, or more, and the country is close to bankrupcy.
"The government is lying about the amount of debt," says Laurence Kotlikoff, an economist at Boston University and co-author of "The Coming Generational Storm: What You Need to Know about America's Economic Future." "It is engaging in Enron accounting."
"The problem is we're seeing an explosion in spending," adds Andrew Moylan, director of government affairs for the National Taxpayers Union.
In 1980, the debt, the accumulated red ink incurred by the federal government, was $909 billion. This represented some 33 percent of gross domestic product, says the Congressional Budget Office (CBO).
Thirty years later, based on this year's second-quarter numbers, the CBO said the debt was $13.4 trillion, or 92 percent of GDP. The CBO estimates the debt will be at $16.5 trillion in two years, or 100.6 percent of GDP.
But these numbers are incomplete. They do not count off-budget obligations such as required spending for Social Security and Medicare. Those programs represent a balloon payment for the government as more Americans retire and collect benefits.
In the case of Social Security, beginning in 2016, the government will be paying out more than it is collecting in taxes. Without basic measures, such as payment cuts or higher payroll taxes, the system could be on the road to bankruptcy, according to officials.
"Without changes," writes Social Security Commissioner Michael Astrue, "by 2037 the Social Security Trust Fund will be exhausted. There will be enough money only to pay about 76 cents for each dollar of benefits."
Include those obligations and other off-budget items and the debt increases, but by how much is debated. Kotlikoff contends that every tax will have to be doubled to pay for entitlements. The problem, he says, is that the federal government's accounting practices are corrupt. And he contends that federal officials who tried to point out the severity of the problem have been ignored or removed.
Kotlikoff says Paul O'Neill, President George W. Bush's first Secretary of the Treasury, was fired because he said the country couldn't afford a tax cut because of the debt problem. How much is the real number for all government debt and obligations?
Kotlikoff and Moylan agree it is much more than the official $13.4 trillion number that one sees on the clock in Midtown. But they disagree over how to add up the exact number. Kotlikoff says the debt is actually $200 trillion.
Still, Moylan says the number is likely about $60 trillion. That is close to the figure quoted by David Walker, the US Comptroller General from 1998 to 2008. He has launched a campaign to convince Americans that the federal spending and debt is a greater threat than terrorism.
But whichever figure is accurate; all three agree that the problem has worsened in the last few years. They say it is because Congress and the administration, whether Republican or Democrat, consistently overspend.
"Recent efforts like the $700 billion Wall Street bailout and the $787 billion stimulus package have heaped on record amounts to our obligations with no end in sight," Moylan warns.
What should be done about the government's rising debt load?
Calls to five lawmakers from the New York area brought few answers. Reps Carolyn Maloney, Peter King and Anthony Weiner along with Senators Charles Schumer and Kirsten Gillibrand either didn't have time to respond because of a heavy schedule or had little to say.
"The way to get our fiscal house in order is by reducing wasteful spending," said Senator Gillibrand through a spokesman. There was no explanation of what constitutes wasteful spending.
More economists and former government officials are pulling back the curtain on what Uncle Sam actually owes in debt. Spoiler alert: It’s probably not the amount on the Midtown sign, below right. Here are some estimates:
$13.4T Congressional Budget Office
$ 50T+ David Walker, Ex-US Comp Gen.
$ 60T Andrew Moylan, National Taxpayers Union
$ 200T Laurence Kotlikoff Boston Univ. economist
---
Watch Kotlikoff on Bloomberg:
Sep 22, 2010 at 5:44 PM
Reader Comments (7)
In light of the Summer’s resignation, its worth looking at the question I still hear from time to time.
This article, Stopping a Financial Crisis, the Swedish Way, published exactly 2 years ago today, provides an answer:
http://www.ritholtz.com/blog/2010/09/gone-swedish/
http://mortgage.ocregister.com/2010/09/16/their-home-was-sold-by-mistake-2/37004/?source=patrick.net#HeaderLogo
http://www2.tbo.com/content/2010/sep/20/201059/walking-away-from-mortgage-gets-easier-when-neighb/news-realestate/?source=patrick.net#text
Stealing bricks from abandoned houses in East St. Louis...
Obama must still be behind Obama because she shamefully plugged Jon Stewart on her show. I guess it is circle the wagons time for Obama. Well, first they are going to toss a few people into the path of the oncoming onslaught. Rahm is the next to go, he always did like Billary best. What fun!!!