Fiscal and Generational Imbalances: New Budget Measures for New Budget Priorities

44 Pages Posted: 30 Oct 2007

See all articles by Jagadeesh Gokhale

Jagadeesh Gokhale

Cato Institute

Kent A. Smetters

University of Pennsylvania - Business & Public Policy Department; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: December 2003

Abstract

This paper describes the deficiencies of the measures used to calculate the federal budget, make revenue and spending projections, and assess the sustainability of current fiscal policies. The nature of the deficiencies hides the tremendous impact that Social Security and Medicare commitments will have on the budget in the future, given the way the programs are structured currently and the momentous demographic shift underway as the baby boom generation approaches retirement age. This paper proposes two new simple measures that will enable government officials and the public to calculate more accurately the costs of maintaining these programs into the relevant future. The measures provide a better understanding of the costs involved, when they will be incurred, and by whom. The measures also provide a way to meaningfully compare the various solutions that have been proposed for dealing with the impending fiscal crisis that will be caused by Social Security and Medicare.

This article was also published as a monograph by the AEI Press, the publisher for the American Enterprise Institute.

Suggested Citation

Gokhale, Jagadeesh and Smetters, Kent, Fiscal and Generational Imbalances: New Budget Measures for New Budget Priorities (December 2003). FRB of Cleveland Policy Discussion Paper No. 5, Available at SSRN: https://ssrn.com/abstract=1025450 or http://dx.doi.org/10.2139/ssrn.1025450

Jagadeesh Gokhale (Contact Author)

Cato Institute ( email )

1000 Massachusetts Avenue, N.W.
Washington, DC 20001-5403
United States

Kent Smetters

University of Pennsylvania - Business & Public Policy Department ( email )

3641 Locust Walk
Philadelphia, PA 19104-6372
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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