“”If you add up all the promises that have been made for spending obligations, including defense expenditures, and you subtract all the taxes that we expect to collect, the difference is $211 trillion. That’s the fiscal gap,” he says. “That’s our true indebtedness.” “
I have never understood this future accounting method people use to say crap like that. If it is $211 T then I am sure it is not in one year, but they never say over what period of time, and if it is something like Social Security then it is far more over a longer period of time.
They determine the liability using Generally Accepted Accounting Principles (GAAP). Under GAAP, you take all of the estimated liabilities, based on reasonable actuarial estimates of life expectancies, medical costs, etc. and then discount them (opposite of compounding) back to a present value using a reasonable rate of interest. You then calculate the estimated tax receipts assuming a reasonable rate of economic growth and then discount those amounts back to a present value using a reasonable rate of interest. The liability is the difference between the two numbers.
Bottom Line: It's a SWAG (Scientific Wild-Assed Guess) that is subject to incredible amounts of manipulation by economists, bureaucrats and others. Hence the debate between the GAO's estimate of a 70 trillion debt (increasing at 5-7 trillion per year by the way), and Professor Kotlikoff's estimate of 211 trillion, and others who put the amount north of 250 trillion.
About the only thing that you can say for sure is that there is no way in hell that this country can ever fulfill more than a meager portion of its obligations. If you are younger than age 55 and count on any meaningful amount of retirement benefits, health care benefits, veterans benefits, housing subsidies, or pension benefits from the government, then you will be very disappointed.