Generational Accounts - a Meaningful Alternative to Deficit Accounting

71 Pages Posted: 3 May 2004

See all articles by Alan J. Auerbach

Alan J. Auerbach

University of California, Berkeley - Department of Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Jagadeesh Gokhale

Cato Institute

Laurence J. Kotlikoff

Boston University - Department of Economics; National Bureau of Economic Research (NBER); Gaidar Institute for Economic Policy

Date Written: January 1991

Abstract

This paper presents a set of generational accounts (GAS) that can be used to assess the fiscal burden current generations are placing on future generations. The GAS indicate the net present value amount that current and future generations are projected to pay to the government now and in the future. The generational accounting system represents an alternative to using the federal budget deficit to gauge intergenerational policy. From a theoretical perspective, the measured deficit need bear no relationship to the underlying intergenerational stance of fiscal policy. Within the range of reasonable growth and interest rate assumptions the difference between age zero and future generations in GAS ranges from 17 to 24 percent. This means that if the fiscal burden on current generations is not increased relative to that projected from current policy (ignoring the just enacted federal budget deal) and if future generations are treated equally (except for an adjustment for growth) the fiscal burden facing all future generations over their lifetimes will be 17 to 24 percent larger than that facing newborns in 1989. The just enacted budget will, if it sticks, significantly reduce the fiscal burden on future generations.

Suggested Citation

Auerbach, Alan Jeffrey and Gokhale, Jagadeesh and Kotlikoff, Laurence J., Generational Accounts - a Meaningful Alternative to Deficit Accounting (January 1991). NBER Working Paper No. w3589. Available at SSRN: https://ssrn.com/abstract=226849

Alan Jeffrey Auerbach (Contact Author)

University of California, Berkeley - Department of Economics ( email )

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Jagadeesh Gokhale

Cato Institute ( email )

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Laurence J. Kotlikoff

Boston University - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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Gaidar Institute for Economic Policy

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Russia

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