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The Books Are Cooked: Our Debt Is Even Worse Than They’re Telling You

How Bad Is Your State?

November 20, 2012

Quick–what’s our national debt?

If you think it’s $16 trillion, give yourself some credit for being aware of the official figure released by the government. But according to Truth In Accounting, a nonpartisan watchdog group that keeps an eye on America’s bills, our country’s true debt is much higher–over $71 trillion, and growing by about $100,000 per second.

Why is our true debt so much higher than the already staggering figure that the government publishes? That’s because our “official” total only includes publicly-held federal debt: bonds, notes, bills, and other forms of loans, from foreign and domestic creditors. But these public debts are only a small part of the sea of red ink our government treads in.

Truth In Accounting’s figure includes not only this public debt, but also intergovernmental debts (loans made from one government branch or agency to another) and unfunded liabilities, the greatest of which are Social Security, Medicare, and pensions. As the population ages, these unfunded liabilities have skyrocketed–and although they aren’t yet part of our official debt, barring substantial reform the government will have no choice but to borrow trillions in order to fulfill them.

At the state level, the outlook is somewhat brighter–or even more dismal, depending on which corner of the U.S. you call home. Through a partnership with State Data Lab, Truth In Accounting has also calculated the true debts for each of the 50 states and the District of Columbia, and ranked them by the amount of debt forced upon each citizen.

Sunshine and Sinkholes

State Data Lab refers to the top six states–Alaska, Wyoming, North Dakota, Utah, Nebraska and South Dakota–as “sunshine states.” Each of these states currently has a budget surplus, meaning its assets outweigh its public debts, although by Truth In Accounting’s numbers, all six states carry billions in unfunded pension liabilities. Perhaps not coincidentally, all six sunshine states have small populations, conservative mindsets, and vast amounts of land and natural resources.

At the other end of the spectrum are the five “sinkhole states,” whose taxpayers face the highest levels of debt and unfunded liabilities: Connecticut, New Jersey, Hawaii, Illinois, and Kentucky. Citizens in these states owe at least $23,000 apiece, with Connecticut taxpayers facing a $49,000 bill for their state’s decades of irresponsible spending.

Noteworthy is the fact that all six states currently running surpluses (the “sunshine states”) have Republican governors, and all but Nebraska (which has a nonpartisan legislature) have Republican legislatures. Among the sinkhole states, all but New Jersey have Democratic governors, and all but one have Democratic-dominated legislatures (Kentucky has a Democratic House and a Republican Senate).

It’s also notable that the governors of Connecticut, Hawaii, and Illinois were among the five executives who scored an “F” on the Cato Institute’s Fiscal Policy Report Card. Cato singled out Connecticut and Illinois as states that have passed large tax increases in response to fiscal crises. According to the numbers from Truth in Accounting and State Data Lab, these tax increases haven’t exactly resolved the budget crises in Hartford and Springfield.

California, nationally infamous for its fiscal state, has the largest gross debt (both “official” and total) but avoided the “sinkhole” designation by finishing 44th in debt per citizen, a product of its large population. Connecticut has less debt than California, but far fewer taxpayers available to foot the bills.

Graphs And Other Tools

In addition to this “Sunshine and Sinkhole” partnership with Truth in Accounting, State Data Lab offers a wealth of easy-to-use tools that help citizens get a grasp on their state’s financial situation. Their website allows users to compare states’ fiscal figures (debts, assets, liabilities, etc.) to a number of demographic factors (including race, education, poverty, and unemployment) as well as political statistics. For fun, try plotting revenue against unemployment, or compare the debt of a sunshine state like Alaska to that of a sinkhole state like Illinois.

A visit to State Data Lab’s site may be an unsettling experience, as the cloud of unfunded pension liabilities looms over even the most financially healthy states. Yet their graphs explain the gravity of America’s budget crisis in a way that the government-issued numbers simply cannot, and reiterate that we cannot escape our fiscal woes without making serious changes to our system of entitlements.

Kevin Palmer

Staff writer at Franklin Center. Contact me at kevin@watchdogwire.com

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