"the Government borrows money when the income from taxes does not cover its spending. "

Just as Tyler Cowen called for mark-to-market social security, the same claim is being in Britain via The Times:

"The Institute for Fiscal Studies said that if the Government had paid up front for all such projects agreed so far, its debt could be nearly £60 billion higher.

There are also concerns about other possible liabilities that could push the real debt figure even higher. The government pledge to guarantee Network Rail’s £18 billion debts have led some to argue that this should be included in the public finances.

The other bone of contention is the liabilities for public sector workers’ future pension payments. Some economists argue that at least a portion of the £650 billion bill should be included in the Government’s books."

What's the problem:

"In March Alistair Darling said that the Government would borrow about £43 billion this year but economists now put the figure at nearer £65 billion, or about 4.5 per cent of GDP.

This is higher than the European recommendation of a maximum deficit of 3 per cent and is the equivalent of each taxpayer racking up nearly £2,000 in debt. When this year’s borrowing is added to the money the Government already owes, it could push public sector debt to nearly half of the country’s GDP."

And:

"If so, the bank’s £1.2 trillion of liabilities, equal to nearly 100 per cent of GDP, will be added to the debt tally, taking it to more than double the 60 per cent limit recommended in the Maastricht treaty.

It is not just the financial crisis that is to blame for the breaking of the 40 per cent rule. Even discounting the recent bailout and Bradford & Bingley, economists forecast that the deteriorating tax take will push debt well above the 40 per cent threshold."

Sound familiar.