The unfunded liabilities of the U.S. government grew in one year by $11 trillion. So says Prof. Lawrence Kotlikoff of Boston University. He is using figures provided by the Congressional Budget Office.
He makes a good point. Republicans and Democrats in Congress a year ago could not figure ways to cut $210 billion a year for a decade. Meanwhile, the real debt grew by $11 trillion.
We live in a fantasy world. Someday, the fantasy will end.
The fiscal gap is getting worse each year. What is this?
The fiscal gap is the present value difference between projected future spending and revenue. It captures all government liabilities, whether they are official obligations to service Treasury bonds or unofficial commitments, such as paying for food stamps or buying drones.
Understand, this is the present value of the gap. It’s not that, over the next 75 years, there will be $11 trillion more debt. It is that the present value of the entire gap is $11 trillion. We need $11 trillion today, invested in high-return capital in the private sector, to meet future obligations.
It gets worse.
The U.S. fiscal gap, calculated (by us) using the Congressional Budget Office’s realistic long-term budget forecast — the Alternative Fiscal Scenario — is now $222 trillion. Last year, it was $211 trillion. The $11 trillion difference — this year’s true federal deficit — is 10 times larger than the official deficit and roughly as large as the entire stock of official debt in public hands.
This has been accelerating for years.