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

By Nicoletta Batini, Julia Guerreiro, Giovanni Callegari

April 1, 2011

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Format: Chicago

Nicoletta Batini, Julia Guerreiro, and Giovanni Callegari. “An Analysis of U.S. Fiscal and Generational Imbalances: Who Will Pay and How?”, (USA: International Monetary Fund, 2011) accessed November 22, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Discount rates, Estate tax, Fiscal policy, Fiscal stance, Real interest rates

Keywords: GDP, Present value, WP

Publication Details

Pages:

38
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2011/072
Stock No:

WPIEA2011072
ISBN:

9781455227075
ISSN:

1018-5941

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