RT News 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 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 for 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.
They can only get out of this with a world war.
And they know it.
-flek
All we have to do is borrow $70 trillion from the FED to pay off this debt, and enforce a little austerity. Have you learned nothing from the Euro-crisis?
War only creates profits for military contractors, for nations it creates massive debts.
How refreshing.
REAL numbers for a change.
“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.”
– There are a couple of factual errors with this statement:
1) What was unprecedented was the “bailing out” of financial institutions, which by law should have filed for bankruptcy.
2) Rather than rescuing the economy, the actions taken will most likely result in financial ruin.
Furthermore, the policies and preparations that have been established for a financial collapse, which began long before 2008, indicates that this was the intention from the very beginning.