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Options To Close the Long-run Fiscal Gap

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Publication Date: February 2007

Publisher(s): Tax Policy Center

Author(s): Jason Furman

Special Collection: John D. and Catherine T. MacArthur Foundation

Topic: Government (Public finance)

Keywords: Taxes, the Budget, and the Economy; Economic Stimulus; Budget Issues; General Tax Policy

Type: Report

Abstract:

The Congressional Budget Office (CBO) projects that the unified deficit in fiscal year 2007 will be $198 billion.1 This amounts to 1.5 percent of Gross Domestic Project (GDP), which is less than the average over the last forty years. This may lull some into a false sense of complacency. It should not. The United States can do a lot better than a $198 billion unified deficit and the United States needs to do much better than a $388 billion non-Social Security deficit. This is especially true in a year when macroeconomic performance is strong and when we face large risks including the private saving rate at its lowest level since 1939, a current account deficit approaching 7 percent of GDP, and major fiscal challenges just around the corner.