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

39 Pages Posted: 13 Apr 2011

See all articles by Nicoletta Batini

Nicoletta Batini

International Monetary Fund (IMF)

Giovanni Callegari

International Monetary Fund

Julia Guerreiro

affiliation not provided to SSRN

Date Written: April 2011

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.

Keywords: Accounting, Economic models, Fiscal analysis, Fiscal policy, Fiscal sustainability, Public debt, Tax reductions, Taxes, United States

Suggested Citation

Batini, Nicoletta and Callegari, Giovanni and Guerreiro, Julia, "An Analysis of U.S. Fiscal and Generational Imbalances: Who Will Pay and How?" (April 2011). IMF Working Papers, Vol. , pp. 1-38, 2011. Available at SSRN: https://ssrn.com/abstract=1808445

Nicoletta Batini

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Giovanni Callegari

International Monetary Fund ( email )

700 19th Street, NW
Washington, DC 20431
United States

Julia Guerreiro

affiliation not provided to SSRN

No Address Available

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