Is Government Fiscal Policy Sustainable in the Long Run?
A rapidly aging population and rising per capita health care expenditures are placing tremendous pressure on the federal budget in the United States. In the absence of significant policy changes, the Congressional Budget Office reports that “under any plausible scenario – federal debt will grow much faster than the economy over the long run.” A rising debt-to-GDP ratio has the potential to impose substantial costs on the national economy and its citizens. As a result, current U.S. fiscal policy is on an unsustainable course, which could have lasting impacts on generations to come. To return to a sustainable fiscal path, policymakers must either raise additional revenue, which has important implications for economic efficiency and growth, or find ways to reduce the rate of growth of government spending, which will require potentially major changes to the way our nation provides health care and retirement benefits. As our nation grapples with these difficult problems, it is critical that
