Fiscal and Generational Imbalances in the U.S. Federal Budget

Abstract

We use the Penn Wharton Budget Model’s microsimulation of U.S. demographics projections to construct estimates of the U.S. federal fiscal and generational imbalances. The federal government’s fiscal imbalance (FI) calculated under current fiscal laws and purchases policies over the next 75 years equals $93.8 trillion, which is 7.0 percent of the present value of projected GDP (PVGDP) over that time horizon. Calculated in perpetuity, FI equals $202.9 trillion, which is 8.2 percent of PVGDP, also calculated in perpetuity. The FI/PVGDP ratio in perpetuity would be 9.4 percent under extension of provisions that are scheduled to expire under the Tax Cuts and Jobs Act of 2017.

Agustin Diaz Casanueva

Economist at Central Bank of Chile

I currently work as an Economist in the Economic Modeling Department at the Central Bank of Chile. My research focuses on Macroeconomics, Labor Economics, and Family Economics.