The Growing U.S. Fiscal Gap

Posted: 21 Jan 2003

See all articles by Daniel Shaviro

Daniel Shaviro

New York University School of Law

Abstract

The United States has a huge long-term fiscal gap, perhaps with a present value of around $74 trillion. By contrast, the explicit national debt of the U.S. is only around $6 trillion. The U.S. may thus be unable to continue meeting its current spending commitments without eventually enacting huge tax increases. The tax cut enacted in 2001 may have increased the fiscal gap by about $13 trillion, but the main cause of the gap is increasing life expectancy, which raises the cost of Social Security and Medicare. While the fiscal gap can in theory be eliminated at the stroke of a pen by simply changing stated policy, in practice this could lead to serious disruption of people's expectations. In addition, the fiscal gap may impair future generations' opportunity to take full advantage of technological advances (such as in treating cancer) that have the potential to make their lives significantly better than ours.

JEL Classification: H50, H60, H62, H63

Suggested Citation

Shaviro, Daniel, The Growing U.S. Fiscal Gap. Available at SSRN: https://ssrn.com/abstract=367960

Daniel Shaviro (Contact Author)

New York University School of Law ( email )

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