U.S. government debt stands at $210 trillion, not the official $13.1 trillion, according to a new working paper published by the Mercatus Center at George Mason University. That’s equivalent to $654,205 per person in the United States, 16 times higher than the current official level.
The paper was authored by Laurence Kotlikoff, an economics professor at Boston University, and Adam Michel with the Mercatus Center. Rather than examine how much debt the government has now, they included how much debt the government will take on in the future.
Fixing the problem will be an enormous undertaking. “No adjustment that sufficiently addresses the US government’s enormous fiscal gap will be small,” Kotlikoff and Michel wrote. “To eliminate the shortfall solely through tax increases, the government would have to immediately and permanently raise all federal taxes — personal and corporate income taxes, excise taxes, and Social Security taxes — by 58 percent.”
They modeled how much it would cost families if that happened. A 30-year-old married couple earning $50,000 a year would see their tax burden rise 15 percentage points over the course of their lifetime. An entire year of their salary would go to the federal government instead of personal spending, under that scenario.
A 30-year-old couple earning $250,000 a year would see a 19 percentage point tax increase, costing them almost $700,000 over their lifetime, nearly three years of work income.
Waiting only makes the situation worse. Doing nothing until 2023 would require a permanent 63 percent tax hike to eliminate the debt, while waiting until 2043 would require a 77 percent hike.
One alternative to relying solely on tax hikes to eliminate the debt is to rely solely on spending cuts instead. That would require a 40 percent permanent, noninterest spending cut starting in 2023. By 2043, it would require a 46 percent cut.
The true level of government debt is 12 times larger than the entire U.S. economy, compared to the 74 percent of the economy calculated by the government.
Kotlikoff and Michel put it bluntly, writing, “The United States is in horrific fiscal shape. … Taxes are not the only way to close the fiscal gap. In reality, it will take some combination of both tax increases and spending cuts to address the burgeoning debt.”
It may seem as if government debt is an unimportant issue that doesn’t affect everyday life, but nothing could be further from the truth. As House Budget Committee Chairman Tom Price, R-Ga., said in February, “Every dollar that’s taxed, and every dollar that’s borrowed, isn’t just a number on a page. It’s a dollar that can’t be used to buy a home, to pay your rent, to buy a car, to pay education fees. All of the things the American people want to do are harmed by an increasing federal debt.”
