While politicians are talking about balance between cuts and revenues, or between total spending and taxes, few are talking about the need for a balance between generations. That’s partially because our government does not even report the full impact that today’s fiscal policies will have on future generations, say Laurence Kotlikoff, a senior fellow with the National Center for Policy Analysis and an economist at Boston University, and Nick Troiano, cofounder and national field director of The Can Kicks Back, a Millennial-driven campaign to fix the national debt.
Fortunately, economists developed two innovative analyses — the fiscal gap and generational accounting — two decades ago to describe the true size of our fiscal imbalance and the repercussions it will have on future generations.
The way we currently measure our country’s indebtedness does not capture the amount of money government has borrowed from itself and the vastly larger amount of money government has promised in future spending through programs such as Social Security and Medicare. Nor does it take into consideration the government’s ability to raise taxes or reduce spending to cover these obligations. The fiscal gap does both.