Public Debt

More than a third of private wealthWealth, private in the OECD plus ChinaChina region consists of entitlements to public retirement benefitsPublic retirement benefits. If the state covered these future obligations using a reserve fund, an insoluble problem of investment would arise. It is only by doing without reserve funds that the twenty-first century welfare stateWelfare state is compatible with price stability at non-negative real interest rates. In calculating government obligations according to the ADL method, statistical offices acknowledge the implicit public debtPublic debt, implicit deriving from the retirement system. Systems of public health insuranceHealth insurance, public and public nursing care insuranceNursing care insurance also generate considerable implicit public debtPublic debt, implicit and corresponding private wealthWealth, private. The TRILL system advocated by Robert Shiller[aut]Shiller, Robert J. can make an important contribution to stabilize the high public debt that will be necessary in the future at low real interest rates. We undertake an empirical estimation of the level of public debt in the OECD plus ChinaChina region. To determine explicit public debtPublic debt, explicit, we use data on net public debt from the International Monetary FundInternational Monetary Fund (IMF). Implicit public debtPublic debt, implicit is mainly comprised of the state’s capitalized financial obligations deriving from the public retirement system and public health insuranceHealth insurance, public. Some statistical offices publish data on the retirement benefit entitlements that have accrued within social securitySocial security systems. This data provides an important basis for our calculations. We estimate that total public debt in the OECD plus ChinaChina region is equivalent to more than 600% of total annual consumption in the region.