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Long-Term Objectives for Government Debt

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  • Alan J. Auerbach

Abstract

This paper considers what fiscal targets the government should use to achieve long-term fiscal objectives. Among its findings are: 1. At least three important and possibly conflicting long-term objectives are associated with concerns about debt and deficits: intergenerational equity, economic performance, and fiscal sustainability. 2. If governments have incentives not to adhere to fiscal policy targets, then restrictions on fiscal policy actions may be desirable, even though such restrictions reduce the scope for policy flexibility. 3. A collection of forward-looking measures, including explicit and implicit government assets and liabilities, can provide far more information than short-term deficit targets alone.

Suggested Citation

  • Alan J. Auerbach, 2009. "Long-Term Objectives for Government Debt," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 65(4), pages 472-501, December.
    • Handle: RePEc:mhr:finarc:urn:sici:0015-2218(200912)65:4_472:lofgd_2.0.tx_2-t
    DOI: 10.1628/001522108X486606
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    Citations

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    Cited by:

    1. Floriana, Cerniglia & Enzo, Dia & Andrew, Hughes Hallett, 2016. "Debt stability under entitlement spending," Working Papers 351, University of Milano-Bicocca, Department of Economics, revised 07 Oct 2016.
    2. Auerbach Alan J., 2014. "Budget Rules and Fiscal Policy: Ten Lessons from Theory and Evidence," German Economic Review, De Gruyter, vol. 15(1), pages 84-99, February.
    3. Shafik Hebous, 2011. "The Effects Of Discretionary Fiscal Policy On Macroeconomic Aggregates: A Reappraisal," Journal of Economic Surveys, Wiley Blackwell, vol. 25(4), pages 674-707, September.
    4. Henning Bohn, 2011. "The Economic Consequences of Rising U.S. Government Debt: Privileges at Risk," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 67(3), pages 282-302, September.
    5. Auerbach, Alan J, 2019. "Fiscal Policy," Department of Economics, Working Paper Series qt6jn5158q, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    6. Toshihiro Ihori, 2014. "Commitment, Deficit Ceiling, and Fiscal Privilege," CIRJE F-Series CIRJE-F-920, CIRJE, Faculty of Economics, University of Tokyo.
    7. Toshihiro Ihori, 2014. "Commitment, Deficit Ceiling, and Fiscal Privilege," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 70(4), pages 511-526, December.
    8. Markus Reischmann, 2016. "Empirical Studies on Public Debt and Fiscal Transfers," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 63.
    9. Potrafke, Niklas & Reischmann, Markus, 2014. "Explosive Target balances of the German Bundesbank," Economic Modelling, Elsevier, vol. 42(C), pages 439-444.
    10. Hughes Hallett, Andrew & Hougaard Jensen, Svend E. & Sveinsson, Thorsteinn Sigurdur & Vieira, Filipe, 2019. "Sustainable fiscal strategies under changing demographics," European Journal of Political Economy, Elsevier, vol. 57(C), pages 34-52.
    11. Manel Antelo & David Peón, 2014. "Fiscal consolidation and the sustainability of public debt in the GIPSI countries," Cuadernos de Economía - Spanish Journal of Economics and Finance, Asociación Cuadernos de Economía, vol. 37(103), pages 52-71, Abril.
    12. Alan J. Auerbach, 2012. "Societal Aging: Implications for Fiscal Policy," IMES Discussion Paper Series 12-E-12, Institute for Monetary and Economic Studies, Bank of Japan.

    More about this item

    Keywords

    deficits; fiscal gap; implicit liabilities; tax smoothing; generational equity;
    All these keywords.

    JEL classification:

    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General

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