How big is the national debt?
You’d think this would be an easy question. Surely we know how much the government owes. Unfortunately, it’s not that simple. The true national debt could be triple the conventional estimate, anywhere from $11 trillion to $31 trillion by my reckoning. The differences mostly reflect explicit and implicit “off-budget” federal loan guarantees. In another economic downturn, these could result in large losses that would be brought “on budget” and worsen already huge deficits. That’s the danger.
My purpose is not to scare or sensationalize. It’s simply to illuminate the problem. Broadly conceived, the national debt covers all debts for which the federal government assumes final responsibility. For politicians, the appeal of “off-budget” programs is that they allow the pleasure of spending without the pain of taxing. But they also create massive exposure for government.
Let’s see why. Below are five estimates of the national debt. I compare each with our national income (gross domestic product), which is the economic base to service debts. In fiscal 2012, GDP was $15.5 trillion. Some economists say a debt ratio exceeding 90 percent slows economic growth. The United States already exceeds this threshold on four of my five measures.