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article imageOp-Ed: Economics Paper - U.S. national debt is really $70 trillion

By Andrew Moran     Aug 14, 2013 in Politics
San Diego - Is the United States national debt $17 trillion, $70 trillion or $222 trillion? That is the question on many observers' minds. Either way, economists of the Austrian persuasion concur that something has to be done.
The United States national debt is one of the many problems facing the nation today. Although some politicians like to claim that it isn’t too much of a big problem, realists concur that a $17 trillion national debt plus interest payments is a definitely an enormous matter that must be dealt with immediately.
A lot of economists, especially of the Austrian school, agree that it is highly unlikely that the federal government will ever pay it off and that a collapse is inevitable, whether it’s rising interest rates, hyperinflation or an admission of insolvency – it could be argued that the U.S. is already a bankrupt country.
What if, though, the $17 trillion debt figure is underestimated? Would it matter much in the end to politicians and statists? Most likely not, but it would show that government accounting is perhaps another example of ineptness in Washington.
The $17 trillion accounting error
James Hamilton, an economics professor at the University of California, published a research paper last month that reviewed the national debt and analyzed the figures that are calculated to come to the final number. The professor’s conclusion is that the national debt isn’t $17 trillion but rather $70 trillion – $70.086 trillion to be exact.
The reason why the figures are a lot higher than initially estimated is that government bureaucrats have omitted numerous liabilities, such as deposit insurance, government trust funds and actions taken by the Federal Reserve. According to Hamilton, the two biggest items in the national debt are Social Security and Medicare.
“With the federal government today being the sole owner of Fannie and Freddie, it seems appropriate to consider both the direct debt obligations as well as their outstanding mortgage guarantees [which are now treated] as an off-balance sheet liability,” Hamilton stated.
In addition, the study noted that the real national debt number has grown $13.5 trillion since 2006 and continues to increase by $2 trillion each year. Here are the exact totals that make up more than $70 trillion: Medicare ($27.6 trillion), Social Security ($26.5 trillion), housing guarantees ($7.5 trillion), FDIC guarantees ($7.4 trillion) and other government trust fund liabilities ($1.8 trillion).
This comes a few months after another study discovered that the actual national debt is really $222 trillion. According to Boston University Professor Lawrence Kotlikoff, the real debt is a lot higher than previous suggestions when you count Medicare and Social Security.
Solutions
Whether the federal government is $17 trillion, $70 trillion or $222 trillion in debt, the fact is that Washington has to take action. A lot of libertarians agree that no one in Washington has put forward a comprehensive plan to tackle the debt.
The usual proposal put forward is to raise taxes and make the rich pay their fair share. However, even if President Barack Obama were to sign an executive order that would institute a 100 percent income tax rate among all of the millionaires’ and billionaire’s incomes, it would only keep the doors of Congress open for an additional 60 to 90 days.
Another concept discussed is entitlement reform, which many believe is a step in the right direction. It should be noted, though, that the U.S. may have to undergo an array of steps to tackle the national debt, such as spending cuts, tax cuts, ending foreign endeavors, changing the role of government and reforming entitlement programs.
If the government does not take bold action soon then the upcoming annual $1 trillion interest debt payments may grow to never-before-seen proportions.
This article was initially published on Capital Liberty News.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of DigitalJournal.com
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