Everyone talks about the national debt. It's a topic that almost everyone has an opinion on, regardless of your political leanings. We track it closely by watching the online US Debt Clock, our news media has become astute at reporting how new legislation will affect the national debt, and some of us even follow a daily update of the national debt on Twitter (OK, maybe that's just me).
But what IS the national debt, and how is it calculated? Well, it's actually pretty simple - it is a historical accounting of nearly 237 years of government cash inflows (ignoring debt issuance) less all government outflows over the same period. The difference at the time of this writing is about $16.5 trillion. Putting personal opinions aside on the size of the number (too big? just right? too small?), in my opinion there's a big problem with the calculation itself. The problem is that no other government calculates their debt in this way. Finally, someone with a larger audience than I is making the same argument.
David Walker is a former U.S. Comptroller General who is making waves by going around and saying that the true national debt isn't $16.5 trillion, its $70 trillion. That's not a typo. The sheer size of the number will make most in the general populace laugh off the article and Mr. Walker's claims as absurd. But his methods are not substantially different than those used at the state or local government level.
As stated in the article, to get from a $16.5 trillion debt to a $70 trillion liability, Mr. Walker adds the unfunded liabilities created by Medicare, Social Security and other similar programs. Well, if you pull out a copy of your local government's financial statements, those statements will most likely include liabilities for other post-employment benefits, and by 2015 the unfunded actuarial liabilities for pensions will be also be recorded as a liability, but they are at least disclosed currently. So if the state and local version of Social Security and Medicare is on their books, why aren't we paying attention to the same at the national level?
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