Accession Number : ADA320798

Title :   A CBO Study: Who Pays and When? An Assessment of Generational Accounting,

Corporate Author : CONGRESSIONAL BUDGET OFFICE (U S CONGRESS) WASHINGTON DC

Personal Author(s) : Sturrock, John

PDF Url : ADA320798

Report Date : NOV 1995

Pagination or Media Count : 76

Abstract : Fiscal policy affects future as well as current generations; someone must pay at some time for all that government ever spends. Economists call this condition the 'zero-sum constraint'--if one generation pays less for a given amount of spending, another generation must pay more. If government does not retire its debt or reduce its spending, it must impose higher taxes to pay the interest. Either way, someone pays. Thus, fiscal policy transfers resources according to age; it determines how much and when anyone of a given generation will ever pay to government. But there is no general measure of how fiscal policy affects different generations. The deficit does not; it only records the change in legal claims on government. For instance, if higher payroll taxes paid for higher Social Security benefits, the deficit would not change. But the elderly would benefit at the expense of young and future generations. Similarly, a new policy that did not change the current deficit, but raised prospective deficits, would impose costs on people who had to meet those obligations. To address such issues, economists Alan Auerbach, Jagadeesh Gokhale, and Laurence Kotlikoff propose a system they call generational accounts. The system can be used to estimate the net amount that the average person of any age today would ever pay government under a given policy. Thus, the accounts add to the box of tools for policy analysis; they try to measure how policy directly affects people by age. They also offer insight into important issues, including long-run solvency, the prospects of future generations, and the cost of risk in choosing policy.

Descriptors :   *POLICIES, *UNITED STATES GOVERNMENT, *ACCOUNTING, *FINANCIAL MANAGEMENT, *OPERATIONAL EFFECTIVENESS, MEASUREMENT, RISK, TOOLS, COSTS, DEFICIENCIES, SALARIES, RECORDS, BENEFITS, TAXES, SOCIAL SECURITY.

Subject Categories : Economics and Cost Analysis
      Government and Political Science

Distribution Statement : APPROVED FOR PUBLIC RELEASE