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Generational accounting measures the consequences that our growing fiscal imbalance will have on future generations. It calculates the difference between total lifetime taxes paid and government transfers collected by age cohort, assuming the fiscal gap is left only to future generations to close. According to the latest generational accounting published by the International Monetary Fund in 2011, taxes on future generations would have to increase by 21.5 points to close the fiscal gap. This analysis can be used to determine how policies distribute their costs and benefits across age groups, just as we now see how they are distributed across income levels.
Putting our fiscal house in order in a generationally balanced way should be an imperative for both parties. Congress can start by requiring the Congressional Budget Office to produce an annual fiscal gap and generational accounting report and, further, to produce similar analyses for all major fiscal legislation pending before Congress. This legislation can be a bipartisan achievement in the name of fiscal sanity and generational equity. In March, Sen. John Thune, R-S.D., took the first step by offering an amendment to the Senate budget resolution. More must follow.
We cannot continue to ignore the economic and moral injustice being wrought on future generations because of our inability or unwillingness to face the facts.
Laurence Kotlikoff is an economist at Boston University and co-author of “The Clash of Generations.” Nick Troiano is co-founder and national field director of The Can Kicks Back, a millennial-driven campaign to fix the national debt.