US debt six times greater than declared – study

The United States has accumulated over $70 trillion in unreported debt, an amount nearly six times the declared figure, according to a new study by University of California-San Diego economics Professor James Hamilton.

The United States has accumulated over $70 trillion in unreported
debt, an amount nearly six times the declared figure, according
to a new study by University of California-San Diego Economics
Professor James Hamilton.

The unique aspect of Hamilton’s study is that he examines federal debt that
has not been publicly released, specifically the federal
government’s support for “housing, other loan guarantees, deposit
insurance, actions taken by the Federal Reserve, and government
trust funds.”

Since the global economy hit rock bottom in 2008, US federal debt
has gone through the roof, increasing from $5 trillion to an
estimated $12 trillion in 2013. Meeting the interest payments
alone on that debt burden presents a formidable challenge to
future US taxpayers: In addition to the debt, Americans must pay
back around $220 billion annually just in interest.

And with interest rates set to rise from their historic lows,
Americans will be confronted with a significantly higher bill in
the future. In fact, the Congressional Budget Office anticipates
that net interest expense on US federal debt will exceed the
entire defense budget by 2021.

This fiscal horror story playing out across America, however, is
actually much worse than publicly recognized.


Much of the current debt load is a direct result of the Great
Recession of 2008, which saw an unprecedented effort on the part
of Washington to rescue the US economy from financial ruin.

This led to a series of controversial operations on the part of
the US Federal Reserve known as “quantitative easing” or
“large-scale asset purchases.” The aim of these programs
was that by buying long-term securities, the Fed would be able to
lower the long-term interest rate, encourage investment and get
the economy rolling again.

According to Hamilton, “the net effect of the Fed’s emergency
lending between 2006 and 2008 was to increase the net
indebtedness of the federal government by over a trillion
dollars, balanced by acquisition of corresponding assets (the
emergency loans).”

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.”



According to the US National Debt Clock, the US government has a
$16.8 trillion debt, which comes out to be over $53,000 for each
US citizen. Looking at those steadily accumulating numbers, it is
difficult to see how the US will square the circle of a
steadily-aging population together with the harsh reality of the
modern economy. 

Robert Bridge is the author of the book, Midnight in the American Empire, which
examines the dangerous consequences of excessive corporate power
in the United States.

Republished from: RT