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  4. Winter 1994
  5. Generational Accounting: A Meaningful Way to Evaluate Fiscal Policy

Journal of Economic Perspectives

ISSN 0895-3309 (Print) | ISSN 1944-7965 (Online)

Generational Accounting: A Meaningful Way to Evaluate Fiscal Policy

  • Alan J. Auerbach
  • Jagadeesh Gokhale
  • Laurence J. Kotlikoff
Journal of Economic Perspectives
vol. 8, no. 1, Winter 1994
(pp. 73–94)
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Abstract

This paper illustrates the technique of generational accounting, a new way to evaluate fiscal policy that overcomes the inherent ambiguities of traditional deficit accounting. The authors illustrate why there is no 'correct' measure of the deficit and how generational accounting--estimating the fiscal burdens current policy places on different generations--provides a clearer picture of the intergenerational and macroeconomic effects of fiscal policy than any measure of the deficit. Their calculations suggest that, despite recent changes, U.S. fiscal policy is unsustainable in that it will ultimately require future generations to bear a much higher burden than those currently alive.

Citation

Auerbach, Alan J., Jagadeesh Gokhale, and Laurence J. Kotlikoff. 1994. "Generational Accounting: A Meaningful Way to Evaluate Fiscal Policy." Journal of Economic Perspectives 8 (1): 73–94. DOI: 10.1257/jep.8.1.73

JEL Classification

  • E62 Fiscal Policy