Home > Market > United States has $58 Trillion of debt that isn’t on the official balance-sheet

United States has $58 Trillion of debt that isn’t on the official balance-sheet

August 20, 2013

Recently James D Hamilton, an economist from University of California, published a paper bringing off-balance sheet federal liabilities to light (PDF). I find it astounding how much debt is simply not acknowledged by official government accounting practices. Currently the national debt held by the public is $11.9 Trillion. Of course if the intragovernmental holdings of $4.8 Trillion is added to the public debt there is a total acknowledged public debt outstanding of $16.7 Trillion! (These figures were current as of 8/16/2013 on treasurydirect.gov). Whether you use the $11 Trillion or $16 Trillion figure, it is hard to dispute our national debt is out of control.

However Mr Hamilton brings to light federal liabilities that don’t get included in the official national balance-sheet. Here is the abstract from his paper:

Much attention has been given to the recent growth of the U.S. federal debt. This paper examines the growth of federal liabilities that are not included in the officially reported numbers. These take the form of implicit or explicit government guarantees and commitments. The five major categories surveyed include support for housing, other loan guarantees, deposit insurance, actions taken by the Federal Reserve, and government trust funds. The total dollar value of notional off-balance-sheet  commitments came to $70 trillion as of 2012, or 6 times the size of the reported on-balance-sheet debt. The paper reviews the potential costs and benefits of these off-balance-sheet commitments and their role in precipitating or mitigating the financial crisis of 2008.

Wow, $70 Trillion! Below is a table provided by Mr Hamilton showing where this $70 Trillion is coming from.  Social security and Medicare are huge chunks of this $70 Trillion; making up a little over $54 Trillion of the national debt. As our country ages and more enter retirement it is important to keep an eye on these numbers.

2006 2008 2010 2012
Treasury debt held by public 4,867 5,837 9,052 11,299
Housing-related commitments 6,386 8,036 7,594 7,520
Student and other loan guarantees 468 547 419 325
FDIC 4,154 4,975 6,575 7,406
Federal Reserve -773 360 -1,136 -1,128
Social security 16,500 18,700 21,400 26,500
Medicare 28,500 33,200 24,900 27,600
Other government trust funds 1,308 1,487 1,646 1,862
Total off-balance-sheet commitments 56,544 67,305 61,398 70,085
Treasury debt held by the public and combined federal off-balance sheet liabilities. Source: Hamilton (2013).

It should be noted that these numbers are kept off the “official” debt tally for various reasons. There are valid arguments both for and against whether these numbers are bad. However since these numbers never seem enter debate it is hard for the average person to determine if an extra $58 Trillion dollars of public debt is dragging our economy down. I would recommend reading the full paper (PDF) to see some of the potential impacts from this high amount of public debt.

h/t The Independent Institute”s MyGovCost.org blog for bringing attention to this paper.

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