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Fiscal Consolidation: Lessons for the United States

Author

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  • William Gale
  • Ian Berlin
  • Sam Thorpe

Abstract

How should the United States respond to its unsustainable fiscal outlook? How and when a country should fiscally consolidate depends on its existing circumstances, policies, and institutions. We review the experiences of other countries that attempted consolidations and highlight lessons applicable to the United States. We find that (1) the United States does not face a short-term crisis, so it can employ gradual adjustments, which may minimize short-term harm, (2) consolidation should occur in a strong economy with monetary accommodation, and (3) tax increases (spending cuts) could plausibly play a larger (smaller) role in US consolidations than in European adjustments.

Suggested Citation

  • William Gale & Ian Berlin & Sam Thorpe, 2025. "Fiscal Consolidation: Lessons for the United States," National Tax Journal, University of Chicago Press, vol. 78(4), pages 989-1015.
    • Handle: RePEc:ucp:nattax:doi:10.1086/738027
    DOI: 10.1086/738027
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