Reagan-Era Economist Warns Treasury That Figures Show America Is Insolvent

A monetary economist who served under President Reagan, Steve Hanke, is warning that a little-noticed Treasury Department financial statement proves that America is now insolvent. Mr. Hanke made the case in a Fortune magazine op-ed published Monday, drawing on figures from the department’s fiscal year 2025 financial statement released last week to what he calls “near-total media silence.” The statement shows that the government holds $47.78 trillion in total liabilities against $6.06 trillion in total assets — a debt-to-asset ratio of roughly eight-to-one. The largest drivers of the government’s liabilities over the past year include a $2 trillion increase in federal debt and interest payable and a $438.8 billion increase in federal employee and veteran benefits.Those figures, however, exclude unfunded obligations like Social Security and Medicare, which are disclosed separately in what the Treasury calls an off-balance-sheet Statement of Social Insurance. Mr. Hanke describes the picture if one includes that statement as “even more alarming.” The 75-year unfunded social insurance obligation, which represents the gap between promised benefits and projected revenues, stands at $88.4 trillion. Combined with the on-balance-sheet liabilities, total federal obligations exceed $136.2 trillion, a sum roughly five times America’s annual GDP.To make those numbers intelligible, Mr. Hanke suggests dropping eight zeros from each figure and reading federal finances as a household budget. The exercise presents a household that earns $52,446, spends $73,378, and is more than $1.3 million in debt, or what Mr. Hanke calls, “a household budget in freefall.”The Government Accountability Office, which audits the Treasury’s financial statements, acknowledged in its report that “progress has been made” on federal financial management but warned that the federal government “continues to face an unsustainable long-term fiscal path.”It further noted that Treasury officials responded to the report by expressing “their continuing commitment to addressing the problems this report outlines.” Exactly how they are addressing the problems while running a nearly $2 trillion annual budget deficit was not explained. The watchdog nonetheless issued a disclaimer of opinion — meaning it could not determine whether the statements were “fairly presented” — citing persistent financial management problems at the Defense Department and ongoing difficulties tracking transactions between federal agencies.This is the 29th consecutive year the office has issued such a disclaimer.

Reagan-Era Economist Warns Treasury That Figures Show America Is Insolvent

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