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

Author

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  • Nicoletta Batini
  • Julia Guerreiro
  • Giovanni Callegari

Abstract

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 2011/072, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:2011/072
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    References listed on IDEAS

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    4. Congressional Budget Office, 2010. "The Budget and Economic Outlook: Fiscal Years 2010 to 2020," Reports 41880, Congressional Budget Office.
    5. Congressional Budget Office, 2010. "The Budget and Economic Outlook: Fiscal Years 2010 to 2020," Reports 41880, Congressional Budget Office.
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    7. Congressional Budget Office, 2010. "The Budget and Economic Outlook: Fiscal Years 2010 to 2020," Reports 41880, Congressional Budget Office.
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    9. Congressional Budget Office, 2010. "The Budget and Economic Outlook: Fiscal Years 2010 to 2020," Reports 41880, Congressional Budget Office.
    10. Congressional Budget Office, 2010. "An Analysis of the President's Budgetary Proposals for Fiscal Year 2011," Reports 21252, Congressional Budget Office.
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    Cited by:

    1. Bertrand Gruss & Mr. Jose L. Torres, 2012. "Macroeconomic and Welfare Costs of U.S. Fiscal Imbalances," IMF Working Papers 2012/038, International Monetary Fund.
    2. Michal Franta & Jan Libich & Petr Stehlík, 2018. "Tracking Monetary-Fiscal Interactions across Time and Space," International Journal of Central Banking, International Journal of Central Banking, vol. 14(3), pages 167-227, June.
    3. David McCarthy, 2021. "80 will be the new 70: Old‐age mortality postponement in the United States and its likely effect on the finances of the OASI program," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 88(2), pages 381-412, June.
    4. 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.
    5. Hsieh, Kevin Yu-Ching & Tung, An-Chi, 2016. "Taiwan’s National Pension Program: A remedy for rapid population aging?," The Journal of the Economics of Ageing, Elsevier, vol. 8(C), pages 52-66.
    6. Ben-Gad, M., 2012. "On deficit bias and immigration," Working Papers 12/09, Department of Economics, City University London.

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