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Should Generational Accounts Replace Public Budgets and Deficits?

  • Robert Haveman

The author assesses the concept of 'generational accounts' and the specific accounts constructed by Alan Auerbach, Jagadeesh Gokhale, and Laurence Kotlikoff (1991). Although these accounts support the assertion of present-orientation in fiscal policy, they rest on numerous assumptions based on judgments that are open to question. These involve the treatment of the public budget constraint, the benefits from public exhaustive expenditures, economic and population projections, the discount rate, and fiscal incidence. Alternative and equally reasonable assumptions could yield radically different conclusions. The author concludes that the Auerbach, Gokhale, and Kotlikoff accounts should not replace the annual public budget, as they argue.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.8.1.95
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Article provided by American Economic Association in its journal Journal of Economic Perspectives.

Volume (Year): 8 (1994)
Issue (Month): 1 (Winter)
Pages: 95-111

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Handle: RePEc:aea:jecper:v:8:y:1994:i:1:p:95-111
Note: DOI: 10.1257/jep.8.1.95
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  1. Eisner, Robert, 1989. "Budget Deficits: Rhetoric and Reality," Journal of Economic Perspectives, American Economic Association, vol. 3(2), pages 73-93, Spring.
  2. Poterba, James M. & Summers, Lawrence H., 1987. "Finite lifetimes and the effects of budget deficits on national saving," Journal of Monetary Economics, Elsevier, vol. 20(2), pages 369-391, September.
  3. 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.
  4. Hoelscher, Gregory, 1986. "New Evidence on Deficits and Interest Rates," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 18(1), pages 1-17, February.
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