Quantifying the Current U.S. Fiscal Imbalance
AbstractThis paper considers the magnitude of the U.S. fiscal imbalance, as measured by the permanent changes needed to stabilize the national debt as a share of GDP. At present, even after recent improvements in forecast deficits, this imbalance stands at 5.3 percent of GDP -- several times the magnitude of the current official deficit. The imbalance is due primarily to the growth of Medicare, Medicaid, and Social Security. Addressing an imbalance of this size will require significant policy changes. Even if current projected reductions in other government spending occur, and policies are adopted to eliminate the estimated OASDI imbalance and balance the federal budget in 2002, an additional and immediate reduction in the primary deficit of 2.7 percent of GDP will be required to establish a feasible fiscal policy. Waiting to adopt policy changes will increase the size of the required annual primary deficit reduction.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6119.
Date of creation: Aug 1997
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Publication status: published as National Tax Journal (September 1997): 387-398.
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- H6 - Public Economics - - National Budget, Deficit, and Debt
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