THE REAL NATIONAL DEBT IS $222 TRILLION

32 comments

Posted on 9th August 2012 by Administrator in Economy |Politics |Social Issues

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Have your heard either candidate for President discussing the truth in this article? Math is hard, but when you use it correctly it can reveal some ugly truths. Kotlikoff is a truth teller. The drones in government don’t follow the same accounting concepts as the real world. When you put government fake accounting into real world numbers, you realize that the government isn’t running annual deficits of $1.3 trillion per year, but deficits of $11 trillion per year. Every year the present value of the unfunded obligations made by our politicians goes up because the promises are one year closer to being honored.

The true present value of future obligations is $222 trillion. This is $700,000 per person. This is $1.9 million per household. This is what you currently owe. Do you feel better? Both candidates are running on platforms of extending tax cuts and not cutting spending or entitlements. The present value of future obligations will be $260 trillion in four years. And that is without a recession or new war in the Middle East.

The fact is that the $222 trillion will not be honored, because it can’t be. The article makes that clear. This entire fraud of promises, lies and pretending will come crashing down and leave this country in a smoldering ruin. There is no courage to face the truth. What happens when the lies are revealed is anyone’s guess. Fourth Turnings are always interesting. 

Blink! U.S. Debt Just Grew by $11 Trillion

            By Laurence Kotlikoff and Scott Burns -             Aug 8, 2012

Republicans and Democrats spent last summer battling how best to save $2.1 trillion over the next decade. They are spending this summer battling how best to not save $2.1 trillion over the next decade.

In the course of that year, the U.S. government’s fiscal gap — the true measure of the nation’s indebtedness — rose by $11 trillion.

The fiscal gap is the present value difference between projected future spending and revenue. It captures all government liabilities, whether they are official obligations to service Treasury bonds or unofficial commitments, such as paying for food stamps or buying drones.

Some question whether “official” and “unofficial” spending commitments can be added together. But calling particular obligations “official” doesn’t make them economically more important. Indeed, the government would sooner renege on Chinese holding U.S. Treasuries than on Americans collecting Social Security, especially because the U.S. can print money and service its bonds with watered-down dollars.

For its part, economic theory sees through labels and views a country’s official debt for what it is — a linguistic construct devoid of real economic content. In contrast, the fiscal gap is theoretically well-defined and invariant to the choice of labels. Each labeling choice changes the mix of obligations between official and unofficial, but leaves the total unchanged.

Dangerous Growth

The U.S. fiscal gap, calculated (by us) using theCongressional Budget Office’s realistic long-term budget forecast — the Alternative Fiscal Scenario — is now $222 trillion. Last year, it was $211 trillion. The $11 trillion difference — this year’s true federal deficit — is 10 times larger than the official deficit and roughly as large as the entire stock of official debt in public hands.

This fantastic and dangerous growth in the fiscal gap is not new. In 2003 and 2004, the economists Alan Auerbach and William Gale extended the CBO’s short-term forecast and measured fiscal gaps of $60 trillion and $86 trillion, respectively. In 2007, the first year the CBO produced the Alternative Fiscal Scenario, the gap, by our reckoning, stood at $175 trillion. By 2009, when the CBO began reporting the AFS annually, the gap was $184 trillion. In 2010, it was $202 trillion, followed by $211 trillion in 2011 and $222 trillion in 2012.

Part of the fiscal gap’s growth reflects changes in policy, such as the Bush and Obama tax cuts, the introduction of Medicare Part D, and the expansion of defense spending. Part reflects “natural” growth of existing programs, including growth in Medicare and Medicaid reimbursement rates. And part reflects the demographic time bomb U.S. politicians are blithely ignoring.

When fully retired, 78 million baby boomers will collect, on average, more than 85 percent of per-capita gross domestic product ($40,000 in today’s dollars) in Social Security, Medicare and Medicaid benefits. Each passing year brings these outlays one year closer, which raises their present value.

Governments, like households, can’t indefinitely spend beyond their means. They have to satisfy what economists call their “intertemporal budget constraint.” The fiscal gap simply measures the extent to which this constraint is violated and tells us what is needed to balance the government’s intertemporal budget.

The answer for the U.S. isn’t pretty. Closing the gap using taxes requires an immediate and permanent 64 percent increase in all federal taxes. Alternatively, the U.S. needs to cut, immediately and permanently, all federal purchases and transfer payments, including Social Security and Medicare benefits, by 40 percent. Or it can mix these terrible fiscal medicines with honey, namely radical fiscal reforms that make the economy much fairer and far stronger. What the government can’t do is pay its bills by spending more and taxing less. America’s children, whose futures are being rapidly destroyed, are smart enough to tell us this.

(Laurence Kotlikoff, an economist at Boston University, andScott Burns, a syndicated columnist, are co-authors of “The Clash of Generations.” The opinions expressed are their own.)

32 Comments
  1. AWD says:

    Bottom line: Baby boomers aren’t gonna get shit. They can’t, there’s nothing left. Even Bernake can’t print that much money.

    Light the fuse to these boomers, they’re gonna blow!

    baby-boomers.gif

    Well-loved. Like or Dislike: Thumb up 11 Thumb down 3

    9th August 2012 at 9:58 pm

  2. AWD says:

    If I understand the article, Obama has actually run up the debt by $11 trillion per year (in addition to the $6 trillion in three years)? That makes $39 trillion in debt racked up under his watch. Good thing there are so many rich people to tax to death. If I were Obama, I’d do some more stimulus, a few trillion more immediately, right before the election. It’s Robin Hood Obama’s duty and prerogative to hand out free cash and entitlements. Krugman would surely agree. Every child born today is born $700,000 in debt. That’s a lot to look forward to.

    3ogn8s.jpg

    Well-loved. Like or Dislike: Thumb up 17 Thumb down 4

    9th August 2012 at 10:09 pm

  3. Ron says:

    Leave the social programs alone.Otherwise you well have riots. Cut the crap out of the military.
    Cut foreign aid.Get rid of agencys. Oh hey just do what Ron Paul is talking about!! Get rid of every hard core prisoner or person on death row and those doing life.Release not violent drug offenders.Oh and when i say get rid of i mean a shot to the head.
    Break up the banks and get rid of the fed. Rethink wall street. Term limits for congress and any wars get voted on and a draft used or it dosent happen. Oh and while i normally wouldnt approve of this,take the money from every person in hollywood who ever said anything about evil rich people or people needing to pay theyre fair share.Take all of Warren Buffets money for sure.
    Ok now i feel better.

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    9th August 2012 at 10:13 pm

  4. Darwin's Money says:

    I used to think Shorting Treasuries was a no-lose proposition…until the rampant government manipulation started in. Maybe I’ll try buying some long-dated options (LEAPS) on some short treasury ETFs or something. Someday, this really has to come crashing down; question is when are you too early vs too late?

    Like or Dislike: Thumb up 3 Thumb down 0

    9th August 2012 at 10:28 pm

  5. ThePessimisticChemist says:

    @Ron – I think we’ll avoid riots if we begin to reduce social programs slowly.

    Over the course of 4-5 years I’d like to see a plan in place to reduce the Social Security and Medicare payments going out, STARTING with an established end date for enrollments as well as a scaling percent that decreases over the years.

    The intent is that those who are too old to being saving aren’t left out in the cold, but we can start getting people prepared for the idea that they are responsible for themselves.

    Medicare on the other hand needs to go the way of the dinosaur but quick. That juggernaut is going to single-handedly tank our entire economy if left alone.

    Well-loved. Like or Dislike: Thumb up 8 Thumb down 2

    9th August 2012 at 10:29 pm

  6. a cruel accountant says:

    Don’t worry its all Ok. That 222 trillion is nothing because in a hundred years the dollar will be worth 4 percent of what it is today. About 8.8 trillion. Just like the last 100 years.

    Ain’t inflation fun!

    Like or Dislike: Thumb up 3 Thumb down 0

    9th August 2012 at 11:05 pm

  7. sensetti says:

    When this mountain crashes to the ground chaos, riots, death and destruction will spread across this land, no easy way out; it’s all pain from here.

    July%202%202012%20pic%202.jpg

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    9th August 2012 at 11:49 pm

  8. Zzzzzz says:

    I love this site, the author’s are well informed & well versed. This is an overwhelming amount of debt. What a legacy to leave future generations. Yet AWD is still finger pointing at the baby boomers like we are the problem. I feel like this is the incubator of the dystopian society in Logan’s Run where anyone over the age of 21 is required to ceremoniously terminate themselves, in order to preserve the public good.
    We can blame the greedy banks, the greedy arms of government but look at all the persoanl greed of yourselves & your neighbors. Who does not know some credit card junkie who spends all his future income on bogus designer clothes, $80 steak dinners at fancy restaurants, $200 concert tickets, bar bills & monthly health club fees.
    The system reaks with stink but nobody wants to admit they passed the gas.

    Well-loved. Like or Dislike: Thumb up 11 Thumb down 3

    9th August 2012 at 12:04 am

  9. card802 says:

    If politicians were our only problem maybe “We the People” could bring about change, but politicians are only one part of the problem.

    I used to care about all this shit, my family was worried about my health I cared so much. Now I’m content to sit back and watch the slow motion train wreck. I can only control what I think I can control, and think I understand. This site, the administrator, and the contributors all help.

    This problem is too big, and there are far too many players with skin in the game. Politicians, central banks, corporations, wall street, the military machine, the federal reserve, and other powerful people we don’t even know about. Obama is just a continuation of Bush and no matter which puppet is chosen by TPTB, nothing will change until change is forced, and we start over with another turning.
    The sad commentary is there is no easy way out from here to there.
    There will be riots, there may be a revolution of sorts, we may have another world war, we may have a civil war, we are all going to suffer pain and misery, some more than others. My kids are having kids and some days that makes me so sad.

    Well-loved. Like or Dislike: Thumb up 12 Thumb down 1

    9th August 2012 at 7:20 am

  10. Administrator says:

    Darwin

    You’ll know it’s too late when there are bands of raoming gangs from Lansdale in our neighborhood looting and pillaging.

    Like or Dislike: Thumb up 4 Thumb down 0

    9th August 2012 at 7:50 am

  11. Novista says:

    Nice rant, Ron

    Just one question: who made you Caesar over other people’s kids and grandkids? To actually propose a draft puts you right in the pantheon of Lincoln, Wilson, and FDR. Don’t you feel proud to be in such august company?

    Like or Dislike: Thumb up 3 Thumb down 0

    9th August 2012 at 8:11 am

  12. card802 says:

    I agree, fuck that draft shit. If the politician wants to wage a war, give him a helmet and a gun and go have some fun.

    Like or Dislike: Thumb up 4 Thumb down 0

    9th August 2012 at 8:35 am

  13. FBD says:

    I’d really like to know how much $222 trillion is on a per second basis. But I don’t know how to do the calculations. Maybe someone can help?

    Maybe my BFF, On The Road Again?

    Like or Dislike: Thumb up 3 Thumb down 0

    9th August 2012 at 8:48 am

  14. FBD says:

    1) —- Last year our debt increased by $11 trillion.

    2) — A solution, the authors say, is an immediate 64% increase in all federal taxes

    But,

    3) Last year, the federal government collected $2.3 trillion in taxes

    Therefore,

    4) A 64% increase results in revenue of $3.7 trillion
    .
    .
    Now, I know I suck at math, but isn’t $3.7 trillion still a lot less than $11 trillion?

    Isn’t a 64% tax increase merely pissing up a rope?

    Like or Dislike: Thumb up 3 Thumb down 0

    9th August 2012 at 9:11 am

  15. On the Road Again says:

    FBD eats shit.

    Like or Dislike: Thumb up 2 Thumb down 0

    9th August 2012 at 9:13 am

  16. Administrator says:

    FBD

    The tax increase wouldn’t solve the gap immediately. Over decades it would reduce the gap.

    He is just showing how ridiculously fucked we are. He isn’t calling for a 64% increase in taxes.

    Like or Dislike: Thumb up 1 Thumb down 0

    9th August 2012 at 9:27 am

  17. FBD says:

    “The answer for the U.S. isn’t pretty. Closing the gap using taxes REQUIRES an IMMEDIATE and PERMANENT 64 percent increase in all federal taxes.”

    It surely sounds like he’s calling for an increase.

    64%, 100%, whatever … you are so correct –” ridiculously fucked” pretty much sums it up brilliantly.

    Like or Dislike: Thumb up 3 Thumb down 0

    9th August 2012 at 9:52 am

  18. Administrator says:

    FBD

    He then went on to say “or a 40% cut in spending”. He isn’t pushing for either idea, just showing how we’ve screwed ourselves beyond repair.

    Like or Dislike: Thumb up 3 Thumb down 0

    9th August 2012 at 9:58 am

  19. youcanthavemyglock says:

    new poster, great site, well the jewish washington post is telling me the economy is improving! i think they forgot to put the onion symbol at the end

    http://www.washingtonpost.com/business/economy/economy-might-be-gaining-traction-new-data-suggest/2012/08/09/23fadef8-e23a-11e1-98e7-89d659f9c106_story.html?hpid=z1

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    9th August 2012 at 10:39 am

  20. Administrator says:

    SocialSecurity-2.jpg

    Like or Dislike: Thumb up 3 Thumb down 0

    9th August 2012 at 12:13 pm

  21. » THE REAL NATIONAL DEBT IS $222 TRILLION « The Burning … says:

    [...] THE REAL NATIONAL DEBT IS $222 TRILLION « The Burning … Go to this article [...]

    Like or Dislike: Thumb up 3 Thumb down 0

    9th August 2012 at 3:33 pm

  22. TeresaE says:

    In other words, the REAL debt added is over 73 (!?!) percent of our GDP, EVERY YEAR!

    Let that sink in, we are indebting our children to the tune of 73 cents of every dollar the ENTIRE economy spends today.

    Sure glad those DC politicians are taking this shit seriously and developing strategies to deal with reality.

    Like or Dislike: Thumb up 3 Thumb down 0

    9th August 2012 at 9:16 pm

  23. On the Road Again says:

    “I’d really like to know how much $222 trillion is on a per second basis. But I don’t know how to do the calculations. Maybe someone can help? Maybe my BFF, On The Road Again?”
    —-FBD

    Wanna know why you eat shit? Math challenged. Answer is so simple even Admin can do it.

    Like or Dislike: Thumb up 2 Thumb down 0

    9th August 2012 at 12:03 am

  24. Domestic Cuts Can’t Close the Gap – Room for Debate – NYTimes.com « Ye Olde Soapbox says:

    [...] The Real National Debt Is $222 Trillion (theburningplatform.com) [...]

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    9th August 2012 at 10:36 pm

  25. juan says:

    Less nicer, but simpler and practical. The rest is just “killing” ourselves. Better, spread the s…
    Ok.
    Step 1 : Stop issuing any public debt (as it is understood, bonds and the like). Announce all will be paid at maturity: cash (with freshly printed million dollar bills, as we are the only one that has the “printer”) or credit in American bank accounts.
    Step 2 a : That will trigger a run on the value of dollar. Suddenly it will be worth nothing. As consequence, the debt is worth nothing, not the public debt (the 16 trillion), not the society debt (222 trillion, if the account is correct), not the cash “assets” we used to have, not the cash liabilities we used to have, etc.
    Step 2 b: That will trigger all “first” world to do similarly. Europe, China, Japan, Gt. Britain, the Brics, the Pigs (they do not have own currency, not even a printer to print fake bills or bonds anymore) and the not acronymed yet.
    Step 2 c: Everybody will be counting the “loses”.
    2.c.1: We: owe nothing, have no operating capital -as the printed bills are worthless- but have all the infrastructure done: all the roads, electric grids, telecommunications, one of the best structured societies -believe it or not- and the best people in the world, land, including farm land, almost all the mineral resources needed, and the know how, etc
    2 c 2 : Europe: owe nothing, have most of the infrastructure done -like us-, a declining society decimating their population day by day -no growth rate-, not as much land as us, equivalent know how
    2 c 3: China: owe nothing, lack of infrastructure, uprising population is the growing economics is not disrupted -and it will be-, not that much land, not that much natural resources -as needed- not as much know how. They will need to keep buying. To who ? you guess right. For how much: as many products as their factories can produce. How will they obtain working capital: we will be lending
    2 c 4: The rest of the world: would need to follow the leaders
    3 Account for what we need:
    3.1 the debt : society debt: social security, medical support, etc
    3.2 the cash assets : issue new dollars for same amount
    4 Lend the money, allocating it first as working capital for any business, in the proper way: 10 k per employee or 25% of the value of whats going to be produced. A formula has to be developed. Include the cash to be lent out of the country for the same purpose, so we obtain the goods they will provide us. The interest rate, a real one, adjusted by inflation, would benefit the creditors of the society debt
    5 Re-establish the contract values: labor, goods, services, etc (mostly on the way and spontaneously -would be adapted up and down several times before finding its real level)
    6 America is again 1950, with 21st century technology and 21st century confort.
    7 Add some Hammuraby rules in our legislation, wipe most of it out -including the today’s tax code, changing it for a simple thing to cover just the real things the society needs the government to do. Eliminate the Social Security -as known today- for all not included in the society debt- and everybody would make their own “401 k” for retirement and “health insurance”, with the society covering the cases when the individual do not reach the minimum.
    8 Keep living happily, as before we were aware of the debt -but after having built everything with its proceeds

    Like or Dislike: Thumb up 1 Thumb down 1

    9th August 2012 at 9:14 am

  26. flash says:

    But , then again isn’t it Congress where budget expenditures originate and all the puppet in the White house actually does is sign on the dotted line?

    National-Debt-GDP-L.gif

    Like or Dislike: Thumb up 2 Thumb down 1

    9th August 2012 at 6:41 am

  27. Cleanup of Sandy expected to add billions to the national debt « Welcome to Eatwelleveryday says:

    [...] http://www.theburningplatform.com/?p=38718 [...]

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    9th August 2012 at 11:27 pm

  28. CONGRESSMAN WANTS $12 BILLION FOR FEMA AND SANDY ADDED TO NATIONAL DEBT « sreaves32 says:

    [...] true present value of future obligations is $222 trillion,” writes Laurence Kotlikoff, professor of economics at Boston University. “This is $700,000 per person. This is $1.9 million [...]

    Like or Dislike: Thumb up 1 Thumb down 0

    9th August 2012 at 2:04 pm

  29. Congressman Wants $12 Billion for FEMA and Sandy Added to National Debt | Cyanide News Network says:

    [...] true present value of future obligations is $222 trillion,” writes Laurence Kotlikoff, professor of economics at Boston University. “This is $700,000 per person. This is $1.9 million [...]

    Like or Dislike: Thumb up 0 Thumb down 0

    9th August 2012 at 8:23 pm

  30. LeRoy Matthews says:

    Study my Letter on Diane@Philosophyinaction.com. (Search: Crazy Inbox)

    Like or Dislike: Thumb up 0 Thumb down 0

    9th August 2012 at 1:47 pm

  31. Congressman Wants $12 Billion for FEMA and Sandy Added to National Debt | Independent News Hub says:

    [...] true present value of future obligations is $222 trillion,” writes Laurence Kotlikoff, professor of economics at Boston University. “This is $700,000 per person. This is $1.9 million [...]

    Like or Dislike: Thumb up 0 Thumb down 1

    9th August 2012 at 5:55 am

  32. Cleanup of Sandy expected to add billions to the national debt | Independent News Hub says:

    [...] http://www.theburningplatform.com/?p=38718 [...]

    Like or Dislike: Thumb up 0 Thumb down 0

    9th August 2012 at 3:57 pm

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