United States Federal Indebtedness and Fiscal Policy Trade‐Offs

Jagadeesh Gokhale and Kent Smetters

Public Budgeting & Finance, 2025, vol. 45, issue 1, 21-56

Abstract: Projected federal spending and taxes are distributed by birth year, gender, race, and lifetime education, using the Congressional Budget Office's 10‐year budget estimates and the Penn Wharton Budget Models' microsimulation. This enables measurement of conventional federal fiscal imbalance (FI): $162.6 trillion in present value, which is six‐fold larger than current debt held by the public. FI implies a shortfall of 26.1% in federal taxes, alternatively, an excess of 33.4% of federal expenditures. The equi‐proportional shortfall of expenditures plus taxes equals 14.6%. Excluding taxes and transfers of some groups, such as the elderly, increases the measured shortfall.

Date: 2025
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