Macroeconomic and welfare costs of U.S. fiscal imbalances /

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Bibliographic Details
Author / Creator:	Gruss, Bertrand, author.
Imprint:	[Washington, D.C.] : International Monetary Fund, ©2012.
Description:	1 online resource (35 pages) : illustrations
Language:	English
Series:	IMF working paper ; WP/12/38 IMF working paper ; WP/12/38.
Subject:	Fiscal policy -- United States -- Econometric models. Debts, Public -- United States -- Econometric models. Debts, Public -- Econometric models. Economic history. Fiscal policy -- Econometric models. United States -- Economic conditions -- Econometric models. United States.
Format:	E-Resource Book
URL for this record:	http://pi.lib.uchicago.edu/1001/cat/bib/12500044

Hidden Bibliographic Details
Other authors / contributors:	Torres, José L., author. International Monetary Fund. Fiscal Affairs Department, issuing body.
ISBN:	1463951493 9781463951498 1463933819 9781463933814 9781463988890 1463988893 9781463933814
Digital file characteristics:	data file
Notes:	At head of title: Fiscal Affairs Department. Title from PDF title page (IMF Web site, viewed January 31, 2012). "January 2012." Includes bibliographical references.
Summary:	In this paper we use a general equilibrium model with heterogeneous agents to assess the macroeconomic and welfare consequences in the United States of alternative fiscal policies over the medium-term. We find that failing to address the fiscal imbalances associated with current federal fiscal policies for a prolonged period would result in a significant crowding-out of private investment and a severe drag on growth. Compared to adopting a reform that gradually reduces federal debt to its pre-crisis level, postponing debt stabilization for two decades would entail a permanent output loss of about 17 percent and a welfare loss of almost 7 percent of lifetime consumption. Moreover, the long-run welfare gains from the adjustment would more than compensate the initial losses associated with the consolidation period.

Table of Contents:

Cover; Contents; I. Introduction; II. The Model; A. Preferences; B. Occupational Choice; C. Consumer's Problem; D. Entrepreneur's Problem and Financial Intermediation; E. The Government; F. Aggregates; G. Market Clearance; H. Timing of Events; I. Equilibrium; III. Calibration; IV. The Policy Experiments; A. The Delay Scenario; B. The Adjust Scenarios; V. Results; A. The Long-Run Effects; B. The Transitional Dynamics; C. Overall Welfare Cost of Delaying Fiscal Consolidation; VI. Conclutions; Tables; 1. Calibration.
2. Non-Interest Expenditures from the U.S. Federal Government as a percentage of GDP (2007)3. Steady State Comparison; Figures; 1. Projections from CBO alternative scenario, Long Term Budget Outlook of 2011; 2. Primary expenditures in the delay and adjust scenarios; 3. Primary deficit in the delay scenario and CBO's forecasts; 4. CBO's Alternative Fiscal Scenario and the Bowles-Simpson Commission's plan; 4. Differences in the percentage of total wealth held by the top percentiles in the delay and passive adjust scenarios.
5. Discounted sum of utility in steady state by wealth percentiles in delay and passive adjust scenarios6. Model Simulations-Fiscal Variables; 7. Model Simulations-Main Macroeconomic Variables; 8. Share of Entrepreneurs in Economy; 9. Present Discounted Sum of Utility by Deciles; References.

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