“If you go to a financial adviser and, you know, you’re in trouble. … They’ll ask [you]: What do you own, and what do you owe? Well, we owe a lot. It’s not just the $18 trillion; it’s the $211 trillion of unfunded mandates as well.”
— Ben Carson (R), speech announcing his presidential candidacy, May 4, 2015
In his campaign launch speech, Republican neurosurgeon Carson used an eye-popping figure to describe what the United States owes. Carson went on to say that while the United States owes $18 trillion plus the $211 trillion, it also owns land, mineral rights, dams, levees, railroads and hundreds of thousands of government buildings, including ones being underused or not being used at all. Given how much the United States owes and owns, Carson promised to “change the government into something that looks more like a well-run business than a behemoth of inefficiency.”
The most widely cited national debt figure is $18 trillion. The Treasury Department’s daily update on the total public debt the day Carson announced his presidential run showed about $13 trillion in debt held by the public (such as Treasury bills and bonds) and $5 trillion in intragovernmental holdings (securities held by other government accounts, such as bonds held by Social Security). Yet Carson adds another $211 trillion — nearly 12 times more than the $18 trillion figure.
Where does the $211 trillion figure come from?
Carson’s spokeswoman pointed to an interview with Boston University economics professor Laurence J. Kotlikoff as the source of this figure. So Carson was not referring to “unfunded mandates,” which are obligations the federal government puts on state and local governments. Instead, he is referring to the “fiscal gap” — the government’s budget imbalance over a certain period of time.
For the $211 trillion figure, that period of time is infinity. Kotlikoff co-authored the “generational accounting” method to calculate the fiscal gap, measuring the current generation’s burdens on younger, future generations. This measures unfunded obligations “through the infinite horizon,” meaning he used the present value of the gross domestic product (from the July 2014 Congressional Budget Office long-term budget outlook) and extended it through infinity. (The Fact Checker previously examined a claim that the United States has $128 trillion in unfunded liabilities.)
Kotlikoff called this gap “America’s hidden credit card bill,” which continues to grow as the baby boomer generation ages and collects more in Social Security, Medicare and other benefits for the elderly.
Eliminating this gap would require an immediate, permanent 59 percent increase in federal tax revenue or an immediate, permanent 38 percent cut in federal spending, Kotlikoff said. In February 2015, he testified before the Senate Budget Committee urging Congress to adopt this accounting method, rather than using the officially reported federal debt. (He is among the economists pushing for passage of the Inform Act, which would require the CBO, Government Accountability Office and the Office of Management and Budget to use the infinite-horizon fiscal gap and generational accounting.)
Other economists have criticized this method, saying it is unreliable. In that same February 2015 hearing, former Reagan aide and Treasury Department official Bruce Bartlett challenged generational accounting and the infinite-horizon fiscal gap. He said it exaggerates the burden of debt and it does not take into consideration that while future generations will inherit obligations to continue paying interest, they also inherit the assets.
The left-leaning Center on Budget and Policy Priorities said generational accounting assumes that there would be “no changes whatsoever in current law for taxes or transfer policies for anyone alive”: “Policymakers have never done that in the past, and they almost certainly will not in the future. Not surprisingly, this misleading approach understates the budget pressures facing people who are now alive while overstating the budget pressures facing those not yet born.”
Another way to calculate the fiscal gap and federal debt is as a percentage of the GDP, as the CBO does. In its 2014 report, CBO said last year’s deficit was about 3 percent of the GDP — the smallest since 2007. But under current laws governing taxes and spending, the deficit would grow relative to the GDP over the next 10, 25, and 75 years. The growth in health-care spending, the aging population and expansion of federal subsidies for health insurance would cause spending for the largest federal programs to grow, CBO said.
CBO calculated the fiscal gap for 2015-2039 as 1.2 percent of the GDP, much lower than Kotlikoff’s calculation (10.5 percent of the GDP forever, under current laws). The CBO also projected the fiscal gap would be roughly 50 percent larger over a 75-period than over a 25-year period, under current laws. (But it adds a caveat that projections grow in uncertainty beyond the first few decades.)
“If you have any measure of federal debt, it would be a $210 trillion fiscal gap,” Kotlikoff told The Fact Checker. To criticisms about his accounting method, he said projections will always be projections, but “you wouldn’t want to take a risk that could make it [the projection] worse. I think CBO is being optimistic on a number of fronts.”
Carson, via his spokeswoman Deana Bass, said in a statement that with the number of baby boomers retiring, “the structural elements of an exponential explosion of debt in America are in place and ready to overtake us.”
“While the exact total of that looming future debt might be difficult to precisely gauge, it is undeniably true that the federal government, which has added debt at an alarming rate just in the last 15 years, is poised to add far, far larger amounts of debt onto our already historically enormous (previously unthinkable) $18 trillion debt in just the next 25 years. A projected $200+ trillion debt is certainly not out of the question,” Carson said in the statement.
The Pinocchio Test
Carson’s general point holds, that the government has unfunded liabilities beyond the reported federal debt. The gap exists, and it is projected to grow by all counts, but the specific dollar figure varies depending on the economist and the accounting method used. In his speech, Carson used a specific figure arrived through a particular method — by calculating unfunded liabilities through infinity. He also managed to incorrectly describe the concept as “unfunded mandates.”
But none of that is clear in Carson’s his speech. Without providing context or an explanation to this jaw-dropping figure, he creates a misleading impression. It does the public a disservice, especially in a high-profile setting such as an announcement of a run for the presidency.
(Update: Kotlikoff published a response to this fact check at Forbes. The Fact Checker has not taken a stance, and has no opinion, on generational accounting or the infinite-horizon fiscal gap.
In his June 6, 2015, speech at the “Roast and Ride” in Boone, Iowa, Carson modified his statement on unfunded liabilities and provided context to this figure. Kudos to Carson for the clarification:
“We talk about our 18-and-half trillion-dollar national debt. I have to tell you, that is not the biggest problem. There’s something called a fiscal gap and you look at what we owe, in the future in terms of Social Security, Medicare, all the other unfunded liabilities, and you look at the receipts that we’re likely to get with our tax system, that gap gets wider every year. And you’re pushing into 100, 200, trillion dollars. That is unsustainable. And as we go forward, something has to give: massive taxes, or massive cuts. Either way, it hurts. And that’s why we have to start thinking about it now. We need to get people who actually understand something about the economy.”)
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