Generational Accounts for the United States: An Update
CONGRESSIONAL BUDGET OFFICE (U S CONGRESS) WASHINGTON DC
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Although relatively new, generational accounting has been used in 26 countries to evaluate the generational stance of national fiscal policies. Generational accounting calculates the size of prospective net tax burdens and lifetime net tax rates that different generations face under current fiscal policy-information that standard budget presentations do not reveal. This method can also be used to calculate the policy changes required for achieving a generationally balanced and therefore sustainable fiscal policy that implies equal lifetime net tax rates on todays newborns and future generations those born after 1998. Calculations made two years ago suggested a sizable generational imbalance in U.S. fiscal policy, implying lifetime net tax rates on future generations that are 72 percent higher than those on newborns in 1995. Since then, unexpectedly strong growth in both gross domestic product GDP and the tax share of GDP has boosted revenues, and slow growth in defense spending has reduced federal purchases as a share of GDP to a postwar low. Those developments augur federal budget surpluses for at least a decade and portend a corresponding reduction in the generational imbalance.
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