Paul L. Caron

Thursday, January 15, 2009

Shaviro Presents The Long-Term Fiscal Gap and Generational Inequity Today at NYU

Daniel Shaviro (NYU) presents The Long-Term Fiscal Gap: Is the Main Problem Generational Inequity?, 76 Geo. Wash. L. Rev. ___ (2008), at NYU today as part of its Colloquium Series on Tax Policy and Public Finance.  The co-convenors are Daniel Shaviro (NYU) & Alan Auerbach (UC-Berkeley, Department of Economics).  Here is the abstract:

Current U.S. budget policy is unsustainable because it violates the intertemporal budget constraint. While the resulting fiscal gap will eventually be eliminated whether we like it or not, the big issue in current budget debate is whether the ultimately unavoidable course corrections should start now or be left for later. This paper argues that concerns of generational equity, which often are relied on by those demanding a prompt course correction, do not convincingly settle the issue, given empirical uncertainties about future generations' circumstances. However, efficiency issues create powerful grounds for urging a course correction sooner rather than later, on three main grounds: to eliminate the risk of a catastrophic fiscal collapse, achieve the advantages of tax smoothing, and smooth adjustments to the consumption made possible by various government outlays. Political economy considerations suggest that the risk of a catastrophic fiscal collapse may be significant even though in principle it could easily be avoided.

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