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An Analysis of U.S. Fiscal and Generational Imbalances

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  • Nicoletta Batini
  • Julia Guerreiro
  • Giovanni Callegari

Abstract

This paper updates existing measures of the U.S. fiscal gap to include federal laws up to and including the mid-December 2010 federal fiscal stimulus. It then applies the methodology of generational accounting to establish how the burden of adjustment required to attain fiscal sustainability is shared across generations. We find that the U.S. fiscal and generational imbalances are large under plausible parametric assumptions, and, while not much affected by the financial crisis, they have not improved much by the passing of the Final Healthcare Legislation. We find that, under our baseline scenario, a full elimination of the fiscal and generational imbalances would require all taxes to go up and all transfers to be cut immediately and permanently by 35 percent. A delay in the adjustment makes it more costly.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 11/72.

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Length: 38
Date of creation: 01 Apr 2011
Date of revision:
Handle: RePEc:imf:imfwpa:11/72

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Keywords: Economic models; Fiscal analysis; Fiscal sustainability; Public debt; Tax burdens; Tax reductions; Taxes; fiscal gap; medicare; tax cuts; healthcare spending; fiscal policy; fiscal burden; budgetary impact; tax payments; medicare spending; fiscal adjustment; budget constraint; fiscal structure; fiscal imbalance; tax burden; health care; fiscal measures; health insurance; tax rates; tax credits; fiscal imbalances; fiscal saving; health care reform; capital income; fiscal stimulus; fiscal revenues; age groups; federal fiscal policy; insurance coverage; fiscal deficit; health insurance coverage; fiscal policies; fiscal outlook; fiscal liabilities; tax revenues; taxation; government spending; fiscal deficits; tax cut; tax credit; health expenditure; fiscal authorities; national health expenditure; sustainable fiscal policy; health-care; fiscal actions; fiscal action; tax increases; fiscal system; fiscal scenarios; national budget; life insurance; fiscal years; health-care costs; fiscal gaps; fiscal consolidation; fiscal costs; medical expenditure; budget measures; fiscal situation; fiscal indicators; budget deficit; healthcare system; fiscal adjustments; national health; fiscal stimulus package; public finances; income growth; health spending; tax collection; fiscal balance; fiscal planning; healthcare services; fiscal finances; fiscal pressures; public finance; nutrition programs; tax policy; fiscal data; macroeconomic policy;

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Cited by:
  1. Michal Franta & Jan Libich & Petr Stehlik, 2012. "Tracking Monetary-Fiscal Interactions Across Time and Space," Working Papers 2012/06, Czech National Bank, Research Department.
  2. Bertrand Gruss & Jose L. Torres, 2012. "Macroeconomic and Welfare Costs of U.S. Fiscal Imbalances," IMF Working Papers 12/38, International Monetary Fund.
  3. Michael Ben-Gad, 2013. "Public Deficit Bias and Immigration," 2013 Meeting Papers 21, Society for Economic Dynamics.
  4. Ben-Gad, M., 2012. "On deficit bias and immigration," Working Papers 12/09, Department of Economics, City University London.

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