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Generational Accounting: A Meaningful Way to Evaluate Fiscal Policy

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  • Alan J. Auerbach
  • Jagadeesh Gokhale
  • Laurence J. Kotlikoff

Abstract

This paper illustrates the technique of generational accounting, a new way to evaluate fiscal policy that overcomes the inherent ambiguities of traditional deficit accounting. The authors illustrate why there is no 'correct' measure of the deficit and how generational accounting--estimating the fiscal burdens current policy places on different generations--provides a clearer picture of the intergenerational and macroeconomic effects of fiscal policy than any measure of the deficit. Their calculations suggest that, despite recent changes, U.S. fiscal policy is unsustainable in that it will ultimately require future generations to bear a much higher burden than those currently alive.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.8.1.73
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Bibliographic Info

Article provided by American Economic Association in its journal Journal of Economic Perspectives.

Volume (Year): 8 (1994)
Issue (Month): 1 (Winter)
Pages: 73-94

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Handle: RePEc:aea:jecper:v:8:y:1994:i:1:p:73-94

Note: DOI: 10.1257/jep.8.1.73
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  1. Stephen P. Zeldes, . "Consumption and Liquidity Constraints: An Empirical Investigation," Rodney L. White Center for Financial Research Working Papers 16-88, Wharton School Rodney L. White Center for Financial Research.
  2. Evans, Paul, 1987. "Do budget deficits raise nominal interest rates? : Evidence from six countries," Journal of Monetary Economics, Elsevier, vol. 20(2), pages 281-300, September.
  3. Willem H. Buiter, 1993. "Public Debt in the USA: How Much, How Bad and Who Pays?," NBER Working Papers 4362, National Bureau of Economic Research, Inc.
  4. Evans, Paul, 1987. "Interest Rates and Expected Future Budget Deficits in the United States," Journal of Political Economy, University of Chicago Press, vol. 95(1), pages 34-58, February.
  5. Auerbach, A.J. & Gokhale, J. & Kotlitkoff, L.J. & Steigum, E.Jr., 1994. "Generational Accounting in Norway: Is Norway Overconsuming Its Petroleum Wealth," Papers 24, Boston University - Department of Economics.
  6. Evans, Paul, 1986. "Is the dollar high because of large budget deficits?," Journal of Monetary Economics, Elsevier, vol. 18(3), pages 227-249, November.
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