Most people have heard that the United States national debt is approaching $39 trillion. It’s a massive number that often dominates political debates and economic discussions. But according to one of the country’s leading fiscal economists, that number may tell only part of the story.
Kent Smetters, a respected economist and faculty director of the Penn Wharton Budget Model, believes the real financial obligations of the U.S. government could be closer to $100 trillion. His argument is not that the official number is wrong, but that it only reflects part of the government’s total commitments.
According to Smetters, federal accounting rules allow huge future obligations to remain largely hidden from the official debt figures. These hidden commitments mostly come from major entitlement programs such as Social Security and Medicare.
If those future promises were counted in the same way that corporations report their liabilities, the financial picture of the United States would look dramatically different.
Understanding the Difference Between Official Debt and Hidden Obligations
To understand Smetters’ argument, it helps to know how government debt is calculated.
The official national debt represents money the government has already borrowed and must legally repay. These are called explicit obligations. They include Treasury bonds, bills and other forms of borrowing that the government issues to finance its spending.
But there is another category of financial commitments known as implicit obligations. These include expected future spending promises made by the government, especially through long-term social programs.
Programs like Social Security and Medicare promise benefits to millions of Americans in the future. However, those promises are not fully funded today. Instead, they operate largely on a pay-as-you-go system, where current workers’ taxes help pay benefits to current retirees.
Because these future payments are not legally structured as debt, they are not included in the official national debt figure.
Smetters says that when these commitments are included, the government’s total obligations become far larger than the public realizes.
Why the Real Number Could Be Near $100 Trillion
According to Smetters, implicit obligations tied to entitlement programs are roughly twice as large as the explicit debt that appears in official reports.
That means the $39 trillion national debt could represent only a portion of the government’s true financial commitments.
When economists consider the long-term gap between promised benefits and expected revenue, the number can approach $100 trillion.
If the U.S. government were required to follow the same accounting rules used by publicly traded companies, these obligations would have to appear on the balance sheet.
In that case, the country’s debt-to-GDP ratio would not be around 100 percent, as it is today. Instead, it could be closer to 300 percent.
This dramatic difference highlights how much future spending remains outside the official debt figures.
Why Smetters Calls It a Shell Game
Some critics of programs like Social Security compare the system to a Ponzi scheme. Smetters rejects that comparison.
A Ponzi scheme involves deliberate fraud and promises of unrealistic returns. Social Security, he explains, never guaranteed extraordinary profits to participants.
Instead, Smetters describes the system as more like a shell game.
In a shell game, objects are moved around to confuse observers about their true location. Similarly, he argues that government accounting rules shift obligations between different categories so they appear smaller in official reports.
Some liabilities show up as explicit government debt, while others remain hidden as future commitments.
Because federal accounting rules focus mainly on explicit debt, policymakers can move financial obligations off the official books without changing the overall burden on future taxpayers.
The Role of Federal Accounting Rules
According to Smetters, these accounting quirks are not accidental. They are built into the laws that guide how government agencies analyze the federal budget.
One example involves how the Congressional Budget Office evaluates Social Security.
By law, the agency must assume that the program will continue paying full scheduled benefits indefinitely. This assumption is required even though current law also says benefits must be reduced automatically if the trust fund runs out.
This creates a strange situation.
The government must assume full payments will continue forever, even though the law requires benefit cuts once the system runs out of money.
As a result, some policy proposals appear to fix Social Security’s financial problems on paper even when they do not actually solve the underlying funding gap.
How Legislation Can Shift Debt Without Solving It
Smetters points to certain reform proposals as examples of this accounting issue.
Some bills claim to reduce the long-term deficit in Social Security. However, when economists look more closely, they find that the reforms may simply move obligations from one category to another.
In some cases, reducing explicit debt can actually increase implicit liabilities even more.
This means the official numbers improve while the real financial burden grows larger.
The effect is not always intentional. Policymakers may simply be working within a framework that does not fully capture the government’s long-term obligations.
But the end result can still mislead both lawmakers and the public.
The Legacy of the 1985 Budget Law
Another factor affecting federal debt projections comes from an older law passed in 1985 called the Gramm-Rudman-Hollings Balanced Budget Act.
This legislation attempted to control deficits by setting limits on federal spending and requiring automatic cuts if those limits were exceeded.
To make the system work, the law created rules for how government agencies must calculate future spending.
One of those rules says discretionary spending cannot be projected to grow faster than inflation over the next decade.
Many economists believe this assumption is unrealistic.
Historically, government spending tends to grow along with the economy, often faster than inflation alone. But because of the law, official projections may underestimate how much spending will actually increase.
According to Smetters, this built-in assumption causes federal debt forecasts to appear more optimistic than they should be.
Restrictions on Economic Modeling
Federal budget analysts also face limits on how they model the broader economic impact of policy changes.
For example, dynamic scoring, which evaluates how policies affect economic growth and tax revenue, is restricted in certain situations.
One unusual rule prevents detailed modeling of policies affecting fewer than one million people.
This means analysts cannot fully account for the economic impact of certain changes, including immigration policies that could significantly increase tax revenue.
Smetters argues that these limitations prevent economists from presenting a complete picture of how government decisions influence long-term finances.
The Social Security Deadline Approaching
While many of these issues remain theoretical today, a major deadline is approaching.
The Social Security trust fund that supports retirement benefits is projected to run out around 2032.
When that happens, the program will not disappear. However, it will only be able to pay benefits from incoming payroll taxes.
Current estimates suggest that payments would drop to about 84 percent of the scheduled benefit levels.
In other words, millions of retirees could face automatic benefit cuts unless Congress intervenes.
This situation makes the debate about long-term obligations far more urgent.
Why Delaying Reform Makes the Problem Worse
According to Smetters, the biggest challenge is not that the problem is unsolvable.
The United States still has the economic capacity to address its long-term fiscal obligations.
However, the longer lawmakers wait, the more painful the solutions become.
If reforms are introduced soon, they can be gradual and spread across multiple generations. For example, policymakers could slowly raise retirement ages, adjust benefit formulas or increase payroll taxes over time.
But if Congress waits until the trust fund is nearly empty, changes will need to happen quickly.
That could mean sudden benefit cuts or steep tax increases, which would be much more difficult politically and economically.
The Bigger Issue: Understanding the Full Picture
Smetters believes the real problem goes beyond the size of the debt itself.
He argues that the way Washington measures and discusses fiscal policy often hides the true scale of the challenge.
Simplified models and outdated accounting rules may produce projections that look manageable, even when underlying financial pressures continue to grow.
Without better transparency and more accurate economic modeling, policymakers risk supporting solutions that shift costs rather than solving the problem.
The official U.S. national debt is already enormous at nearly $39 trillion.
But economists like Kent Smetters warn that the government’s true financial obligations could be far larger once future promises from programs like Social Security and Medicare are fully considered.
While the United States is not on the verge of financial collapse, the window for gradual and manageable reforms may be closing.
Addressing these challenges will require clearer accounting, honest policy discussions and long-term planning that looks beyond the next election cycle.
The sooner those conversations happen, the easier it will be to protect both the country’s finances and the retirement security of future generations.
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