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Fiscal and generational imbalances: new budget measures for new budget priorities

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  • Jagadeesh Gokhale
  • Kent Smetters

Abstract

This paper describes the deficiencies of the measures used to calculate the federal budget, make revenue and spending projections, and assess the sustainability of current fiscal policies. The nature of the deficiencies hides the tremendous impact that Social Security and Medicare commitments will have on the budget in the future, given the way the programs are structured currently and the momentous demographic shift underway as the baby boom generation approaches retirement age. This paper proposes two new simple measures that will enable government officials and the public to calculate more accurately the costs of maintaining these programs into the relevant future. The measures provide a better understanding of the costs involved, when they will be incurred, and by whom.

Suggested Citation

  • Jagadeesh Gokhale & Kent Smetters, 2003. "Fiscal and generational imbalances: new budget measures for new budget priorities," Policy Discussion Papers, Federal Reserve Bank of Cleveland, issue Dec.
  • Handle: RePEc:fip:fedcpd:y:2003:i:dec:n:5
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    References listed on IDEAS

    as
    1. Peter Diamond, 2004. "Social Security," American Economic Review, American Economic Association, vol. 94(1), pages 1-24, March.
    2. Julie Lee & Mark McClellan & Jonathan Skinner, 1999. "The Distributional Effects of Medicare," NBER Chapters, in: Tax Policy and the Economy, Volume 13, pages 85-108, National Bureau of Economic Research, Inc.
    3. Kent Smetters, 2003. "Is the Social Security Trust Fund Worth Anything?," NBER Working Papers 9845, National Bureau of Economic Research, Inc.
    4. Kotlikoff, Laurence J., 2002. "Generational policy," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 27, pages 1873-1932, Elsevier.
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    Keywords

    Fiscal policy; Budget;

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