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“An Analysis of U.S. Fiscal and Generational Imbalances; Who Will Pay and How?”


  • Nicoletta Batini
  • Julia Guerreiro
  • Giovanni Callegari


This paper updates existing measures of the U.S. fiscal gap to include federal laws up to and including the mid-December 2010 federal fiscal stimulus. It then applies the methodology of generational accounting to establish how the burden of adjustment required to attain fiscal sustainability is shared across generations. We find that the U.S. fiscal and generational imbalances are large under plausible parametric assumptions, and, while not much affected by the financial crisis, they have not improved much by the passing of the Final Healthcare Legislation. We find that, under our baseline scenario, a full elimination of the fiscal and generational imbalances would require all taxes to go up and all transfers to be cut immediately and permanently by 35 percent. A delay in the adjustment makes it more costly.

Suggested Citation

  • Nicoletta Batini & Julia Guerreiro & Giovanni Callegari, 2011. "“An Analysis of U.S. Fiscal and Generational Imbalances; Who Will Pay and How?”," IMF Working Papers 11/72, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:11/72

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    1. repec:nbr:nberch:13342 is not listed on IDEAS
    2. Alberto Alesina & Francesco Giavazzi, 2013. "Fiscal Policy after the Financial Crisis," NBER Books, National Bureau of Economic Research, Inc, number ales11-1, January.
    3. Alan J. Auerbach & Yuriy Gorodnichenko, 2012. "Measuring the Output Responses to Fiscal Policy," American Economic Journal: Economic Policy, American Economic Association, vol. 4(2), pages 1-27, May.
    4. Lawrence Christiano, 2014. "Understanding the Great Recession," Annual Meeting Plenary 2014-1, Society for Economic Dynamics.
    5. Karel R. S. M. Mertens & Morten O. Ravn, 2014. "Fiscal Policy in an Expectations-Driven Liquidity Trap," Review of Economic Studies, Oxford University Press, vol. 81(4), pages 1637-1667.
    6. Robert J. Barro & Charles J. Redlick, 2011. "Macroeconomic Effects From Government Purchases and Taxes," The Quarterly Journal of Economics, Oxford University Press, vol. 126(1), pages 51-102.
    7. Marco Jacopo Lombardi & Feng Zhu, 2014. "A shadow policy rate to calibrate US monetary policy at the zero lower bound," BIS Working Papers 452, Bank for International Settlements.
    8. Günter Coenen & Christopher J. Erceg & Charles Freedman & Davide Furceri & Michael Kumhof & René Lalonde & Douglas Laxton & Jesper Lindé & Annabelle Mourougane & Dirk Muir & Susanna Mursula & Carlos d, 2012. "Effects of Fiscal Stimulus in Structural Models," American Economic Journal: Macroeconomics, American Economic Association, vol. 4(1), pages 22-68, January.
    9. Michael T. Owyang & Valerie A. Ramey & Sarah Zubairy, 2013. "Are Government Spending Multipliers Greater during Periods of Slack? Evidence from Twentieth-Century Historical Data," American Economic Review, American Economic Association, vol. 103(3), pages 129-134, May.
    10. Anja Baum & Marcos Poplawski-Ribeiro & Anke Weber, 2012. "Fiscal Multipliers and the State of the Economy," IMF Working Papers 12/286, International Monetary Fund.
    11. Derek Anderson & Benjamin L Hunt & Mika Kortelainen & Michael Kumhof & Douglas Laxton & Dirk V Muir & Susanna Mursula & Stephen Snudden, 2013. "Getting to Know GIMF; The Simulation Properties of the Global Integrated Monetary and Fiscal Model," IMF Working Papers 13/55, International Monetary Fund.
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    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Bertrand Gruss & Jose L. Torres, 2012. "Macroeconomic and Welfare Costs of U.S. Fiscal Imbalances," IMF Working Papers 12/38, International Monetary Fund.
    2. Libich, Jan & Nguyen, Dat Thanh & Stehlík, Petr, 2015. "Monetary exit and fiscal spillovers," European Journal of Political Economy, Elsevier, vol. 40(PA), pages 184-206.
    3. repec:eee:joecag:v:8:y:2016:i:c:p:52-66 is not listed on IDEAS
    4. Michal Franta & Jan Libich & Petr Stehlík, 2012. "Tracking Monetary-Fiscal Interactions across Time and Space," CAMA Working Papers 2012-40, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    5. Ben-Gad, M., 2012. "On deficit bias and immigration," Working Papers 12/09, Department of Economics, City University London.


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