Worried about the economic future of your children, grandchildren, and great-grandchildren? Brace yourself for a big number. By one prominent economist’s calculation, the U.S. federal government faces a long-term “fiscal gap”—the difference between projected future expenditures and receipts—of about $200 trillion.
This sounds like the kind of thing that’s embraced by deficit hawks and small-government types on the Right and strongly resisted by most Democrats. In fact, the fiscal gap is a nonpartisan accounting concept. Twelve winners of the Nobel prize for economics have endorsed a bill to require the federal government to do an official annual calculation of the fiscal gap (as opposed to the $200 trillion figure, which is a rough and unofficial estimate). The luminary endorsers of the bill, who rarely find common ground on political issues, include liberal Kenneth Arrow and conservative Robert Lucas.
The existence of a huge fiscal gap says America is spending beyond its means, but it doesn’t necessarily mean the government needs another big round of cuts, at the expense of social programs and the military, when the new fiscal year begins on Oct. 1.
Some spending pays for itself in the long run by strengthening the economy’s ability to generate growth and tax revenue. Education and infrastructure are potential examples. Increasing that kind of spending can actually shrink the long-term fiscal gap.
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