Working Paper: NBER ID: w3589
Authors: Alan J. Auerbach; Jagadeesh Gokhale; Laurence J. Kotlikoff
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.
Keywords: Generational Accounts; Fiscal Policy; Intergenerational Welfare
JEL Codes: H62; H63
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Increases in government expenditures on current generations (H60) | Future generations shoulder a larger fiscal burden (H60) |
| Current policies remain unchanged (E61) | Fiscal burden on future generations will be 17 to 24 percent larger than that facing newborns in 1989 (H60) |