The country’s debt isn’t $39 trillion. According to one economist, the real figure is closer to $100 trillion.

America's True Debt Burden: Far Beyond Official Numbers

The official U.S. national debt is approaching $39 trillion. However, some leading fiscal experts argue that the actual figure is much higher—potentially close to $100 trillion—due to government accounting practices that obscure the full extent of the country's financial obligations. As of this writing, the national debt clock reads $38.92 trillion, according to Treasury data.

Unpacking the Real Debt: Insights from Kent Smetters

Kent Smetters, who directs the Penn Wharton Budget Model and is recognized as a top authority on fiscal policy, contends that the $39 trillion figure is misleading. He estimates the nation's true financial commitments are closer to $100 trillion.

This discrepancy arises from the difference between explicit debts—those the government is legally bound to repay—and implicit obligations, which are future promises such as Social Security and Medicare benefits. These implicit commitments, while not legally enforceable, are politically and morally significant. Smetters notes that these hidden liabilities are about twice as large as the official debts, with much of the burden tied to unfunded promises within entitlement programs.

If the federal government were held to the same accounting standards as public companies, Smetters explains, the debt-to-GDP ratio would soar from the current 100% to nearly 300%. This gap is not accidental; rather, it is the result of federal accounting rules that intentionally mask the full scale of the nation's financial challenges.

Not a Ponzi Scheme, But a Shell Game

Smetters is deliberate in his terminology. While some critics liken Social Security's pay-as-you-go system to a Ponzi scheme, Smetters disagrees. He clarifies that, unlike a Ponzi scheme—which is inherently fraudulent—Social Security never promised above-market returns. Instead, he describes the system as a "shell game," where obligations are shifted from explicit debts to implicit, off-the-books promises, thanks to federal budget rules that ignore these hidden liabilities.

Efforts to bring more transparency, such as Treasury Secretary Paul O’Neill’s 2001 attempt to record pay-as-you-go liabilities, were derailed by major events that year. The framework for this accounting approach was later detailed in a 2003 publication by the American Enterprise Institute.

Federal Law and the Art of Distraction

Smetters points out that federal statutes themselves embed this misdirection. With experience at both the Congressional Budget Office (CBO) and the U.S. Treasury, he recalls that legislation from 1985 laid the groundwork for these accounting maneuvers.

By law, the CBO must analyze Social Security as if it will always pay full benefits, even after its trust fund is depleted. Yet, current law also mandates automatic benefit cuts once the fund runs out, a reality the CBO is not allowed to model. This quirk enables lawmakers to propose reforms that appear to solve funding gaps on paper, while actually shifting costs to the implicit ledger and worsening the long-term outlook. The Social Security 2100 Act, for example, was celebrated for closing the program’s funding gap, but Smetters argues it actually increased the nation’s hidden debt.

In effect, these legislative choices move liabilities out of public view, making it seem as though progress is being made when, in reality, the underlying problems grow.

How Outdated Rules Skew Budget Projections

Smetters attributes many of these issues to lingering effects of past legislation, particularly the 1985 Gramm-Rudman-Hollings Balanced Budget Act. This law prevents the CBO from projecting discretionary spending growth beyond inflation, a restriction that Smetters and his colleagues found unrealistic during his tenure at the agency. As a result, official debt forecasts are consistently too optimistic.

He explains that the CBO is legally barred from assuming discretionary spending will outpace inflation, even though historical data shows otherwise. This built-in flaw means the agency routinely underestimates future debt growth.

Additionally, the CBO faces limits on "dynamic scoring," or modeling the broader economic effects of policy changes, for measures impacting fewer than a million people. This restriction means the fiscal benefits of high-skilled immigration, for example, are often overlooked in official projections, as highlighted in a 2024 analysis by former CBO director Douglas Elmendorf and economist Heidi Williams.

These outdated rules and political compromises have led to a federal budgeting process that consistently paints a rosier picture than reality justifies.

Social Security's Impending Crisis

For Social Security, the law requires the CBO to assume full benefits will always be paid—a conservative assumption when the trust fund was healthy, but now a source of distortion. Smetters notes that discretionary spending naturally grows with the economy, but legal constraints prevent official models from reflecting this reality.

The consequences of these accounting practices are about to become tangible. The Social Security trust fund is now expected to be depleted by 2032, a year earlier than previously forecast. When that happens, benefits will be automatically reduced to match incoming payroll taxes—currently estimated at about 84% of promised payments—affecting millions of retirees without any need for congressional intervention.

Despite the urgency, Smetters observes that years of alarmist warnings have left lawmakers disengaged. He warns that this complacency is risky, as the window for gradual, manageable reforms is closing. Delaying action will force more abrupt and painful solutions, such as sharp tax increases or sudden benefit cuts, rather than gradual adjustments spread over time.

The Core Issue: Flawed Fiscal Analysis

At the heart of the problem, Smetters argues, is a fundamental failure in how Washington assesses fiscal policy. Simplified models and politically convenient scoring rules not only misrepresent the debt but also mislead policymakers.

The Treasury’s own Financial Report of the United States Government estimates the 75-year unfunded liability at $73.2 trillion, driven by Social Security and Medicare. The longer these obligations remain off the official books, the less pressure there is to address them, and the more expensive solutions become over time.

The CBO projects that annual deficits will reach $1.9 trillion by 2026 and $3.1 trillion by 2036, even under current law that assumes full Social Security benefits continue after the trust fund is exhausted. This masks the true severity of the fiscal outlook.

Without transparent, detailed economic models that accurately reflect the transfer of costs across generations, Smetters warns, lawmakers will continue to fall for superficial fixes that merely shift liabilities without addressing the root issues.

While Smetters does not believe the U.S. faces imminent collapse, he cautions that the opportunity for a controlled solution is slipping away. The very accounting rules intended to guide fiscal policy are, in fact, steering the country off course.

This article was originally published on Fortune.com.