Thinking Citizen Blog — $31 trillion in Debt and Rising: Why? Who Cares? So What? How Much Is Too Much?
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Thinking Citizen Blog — Tuesday is Economics, Finance, and Business Day
Today’s Topic: $31 trillion in Debt and Rising: Why? Who Cares? So What? How Much Is Too Much?
Have you ever thought about the rising federal debt? Have you ever looked at it closely? Have you ever cared? Or do your eyes glaze over every time the topic comes up? Do you skip those articles? Well, if so, I hope that ends today with this post. Because debt matters. Debt matters because truth matters. And the truth in this case hurts. As it so often does. And the $31 trillion dollar number is a lie. The real debt of the United States is far, far higher. The real debt of the United States includes the unfunded Medicare and Medicaid and Social Security liabilities that are not on the balance sheet. This fraud is of Enronian dimensions. If a private company tried this sort of sleight-of-hand the perpetrators would be imprisoned. Such reporting would be a violation of GAAP accounting. GAAP stands for Generally Accepted Accounting Principles. Every high school graduate should know the difference between GAAP and non-GAAP accounting but most Harvard graduates don’t partly because Harvard doesn’t even teach accounting to undergraduates. If you want to be an informed US citizen, you have to ride your bicycle or take the subway to MIT, that trade school located down Mass Ave. The real debt of the United States which includes the off-balance sheet liabilities is sometimes called the “fiscal gap” and is the cornerstone of what is called “generational accounting.”
Today, a few notes. Experts — please chime in. Correct, elaborate, elucidate.
THE DYNAMIC THAT KEEPS THAT SUCKER RISING, RISING, AND RISING
1. Spend, get votes.
2. Tax, lose votes.
3. What is a Congressman to do?
NB. Hmmm. What is the rational thing to do? What imaginable circumstances could change the risk/reward ratio? In case you are wondering, the rational thing is to spend and borrow.
SO WHAT IS THE REAL DEBT OF THE UNITED STATES? Well over $200 trillion
1. Larry Kotlikoff, a professor of economics at Boston University, put that number at over $200 trillion in 2012.
2. But being a rational human being himself Kotlikoff has stopped talking about it after shouting about it at the top of his lungs for over a decade.
3. He even ran for President of the United States with fiscal honesty as his principal plank in 2012 and 2016. A losing strategy.
NB: Has anyone seen updated numbers on the fiscal gap? who cares? who should? Remember the three monkeys? See no evil. Hear no evil. Speak no evil. Or the story of Emperor with No Clothes?
THE CAUSES OF THE RECENT RISE IN REPORTED DEBT — photo below is of Kotlikoff, a voice once crying in the wilderness (he got so hoarse he stopped)
1. “America’s debt is now six times what it was at the start of the 21st century. It is the largest it has been, compared with the size of the US economy since World War II, and it’s projected to grow average about $1.3 trillion a year for the next decade.” (NYT, first link below)
2. “But America’s ballooning debt is the result of choices made by both Republicans and Democrats. Since 2000, politicians from both parties have made a habit of borrowing to finance wars, tax cuts, expanded federal spending, care for baby boomers and emergency measures to help the nation endure two debilitating recessions.”
3. “There have been bipartisan tax cuts and bipartisan spending increases driving that growth, “It’s not the simple story of Republicans cut taxes and Democrats grow spending. Actually, they all like to do all of it.” (Maya MacGuineas, president of the Committee for a Responsible Federal Budget.
https://www.nytimes.com/2023/01/22/business/economy/federal-debt-history.html
https://en.wikipedia.org/wiki/Laurence_Kotlikoff
https://en.wikipedia.org/wiki/Generational_accounting
QUOTE OF THE MONTH
“Whenever you are wrong, admit it. Whenever you are right, shut up.” - Ogden Nash
ATTACHMENTS BELOW:
#1 A graphic guide to justice (9 metaphors on one page).
#2 “39 Songs, Prayers, and Poems: the Keys to the Hearts of Seven Billion People” — Adams House Senior Common Room Presentation, 11/17/20
PDF with headlines — Google Drive
YOUR TURN — Please share:
a.) the coolest thing you learned this week related to business, economics, finance.
b.) the coolest thing you learned in your life related to business, economics, finance.
c.) anything at all related to business, economics, finance.
d.) anything at all
