Generational Accounts - A Meaningful Alternative to Deficit Accounting

Alan Auerbach, Jagadeesh Gokhale and Laurence Kotlikoff

No 3589, NBER Working Papers from National Bureau of Economic Research, Inc

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.

Date: 1991-01
Note: EFG PE EFG AG
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Published as Auerbach, Alan J., Jagadeesh Gokhale and Laurence J. Kotlikoff. "Generational Accounting: A Meaningful Way To Evaluate Fiscal Policy," Journal of Economic Perspectives, 1994, v8(1), 73-94.
Published as Generational Accounts: A Meaningful Alternative to Deficit Accounting , Alan J. Auerbach, Jagadeesh Gokhale, Laurence J. Kotlikoff. in Tax Policy and the Economy, Volume 5 , Bradford. 1991

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Chapter: Generational Accounts: A Meaningful Alternative to Deficit Accounting (1991)
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