I write to ask you to join 11 Nobel Laureates in Economics, other leading economists, and former government officials in endorsing the INFORM ACT (Intergenerational Financial Obligations Reform Act) at www.theinformact.org.
All endorsements will be included in a letter to Congress, which is posted on the website, that will appear early this fall in a full-page ad in the New York Times.
The INFORM ACT, which I drafted in large part with the assistance of Alan Auerbach, requires the Congressional Budget Office (CBO), the Government Accountability Office (GAO), and the Office of Management and Budget (OMB) to do fiscal gap and generational accounting on an annual basis and, upon request by Congress, to use these accounting methods to evaluate major pieces of proposed legislation.
While no measure of fiscal sustainability and generational equity is perfect, fiscal gap and generational accounting offer significant advantages relative to conventional measures of official debt. First, they are comprehensive and forward-looking. Second, they are based on the government’s intertemporal budget constraint, which is a mainstay of our dynamic models of fiscal policy. Third, they do not leave anything off the books.
Fiscal gap and generational accounting have been done for roughly 40 developed and developing countries either by their treasury departments, finance ministries, or central banks, or by the International Monetary Fund (IMF), the World Bank, or other international agencies, or by academics and think tanks. Fiscal gap accounting is not new to our own government. The Social Security Trustees and Medicare Trustees have been presenting such calculations for their own systems for years in their annual reports. And generational accounting has been included in the President’s Budget on three occasions.
According to recent IMF and CBO projections, the U.S. fiscal gap is many times larger than the official debt and compounding much more rapidly. The longer we wait to close the fiscal gap, the more difficult the adjustment will be for ourselves and for our children. This said, acknowledging the government’s fiscal gap and deciding how to deal with it does not rule out productive government investments in infrastructure, education, research, or the environment, or in pro-growth tax reforms.
We cannot change or fully avoid politics. But our profession has a responsibility to the truth, as best we can describe it, that transcends politics –– a responsibility that becomes a moral imperative when our nation’s economic future and our children’s welfare are at stake.
Please join me in endorsing this critically important bill at www.TheInformAct.org, and please use whatever social media and communication tools you have available to encourage your colleagues, friends, and associates to do the same.
With deep appreciation for considering this request,
Professor of Economics