The problem is far greater than official debt figures suggest. Government debt data in most countries massively understates the real situation. Almost all commentary on country debt is focussed on official Government country debt as a percentage of GDP. But this number represents only a fraction of real country indebtedness. More than 20 years ago the problem was illustrated vividly by Kotlikoff and Burns, in a book presciently called The Clash of Generations:

"Virtually all of Uncle Sam's IOU's are off the books. They are unofficial, informal, implicit, hidden away in odd places like alcoholic's bottles. But call them what you will, paying 78 million baby boomers their Social security, Medicare and Medicaid benefits is a very real obligation."

Kotlikoff and Burns calculated actual indebtedness when unfunded obligations are included (they called it the Fiscal Gap) to be many times the official debt level that generates so much angst, and far above the 100% public debt-to-GDP level that has often been thought of as the road to perdition in debt terms. They acknowledged that many heroic assumptions have to be made to produce such calculations, not least the level of economic growth and inflation either or both of which can reduce the debt burden. But the "fiscal gap" is clearly large under any set of assumptions.

As Nouriel Roubini pointed out in his 2022 book Megathreats, "...unfunded liabilities deriving from aging and a pay-as-you-go welfare system for the elderly - pension, health care, disability benefits and other services - are huge and exploding over time, especially in advanced economies, but also in some aging emerging markets ... Longer life expectancies and new medical technologies, once a dream, now pose a nightmare."

Put simply, rising longevity plus static levels of retirement around 65, coupled with rapid reductions in family size, are producing an ever larger percentage of old people dependent on benefits, (to be paid for by a shrinking workforce), the cost of which already far exceeds current social security taxes. Yet opposition to potential solutions is fierce .Even a very modest attempt at raising the retirement age from 62 to 64 in France recently produced massive opposition including street riots. Solutions are unlikely to include faster economic growth to augment the size of the economic pie for a variety of reasons. Not least that rising interest rates are increasing the funding costs of official debt to levels that are already consuming big chunks of taxation in many countries, so reducing income that might otherwise have been used to foster faster economic growth.


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