Bradford Delong writes Notes:
Long-Term Budgeting
Yet another book to add to the
must-read-soon pile:
Which links to an Economist article, In
the long run we are all broke, How
to stop governments going bust.
...Most countries' explicit net
debt - issued as bonds and traded every day in financial markets - is at
manageable levels, relative to GDP. However, embodied in current tax
and expenditure policies are a lot of obligations for which governments
have not yet had to make explicit provision. This implicit liability
arises mainly from future increases in spending on pensions and health
care. Include it, and total debt vaults to levels last seen (for
explicit debt) in wartime. Governments often fall into bad habits when
their debts are so high, usually by resorting to the printing press and
using inflation to cut the real value of their liabilities....
So what is to be done? First,
governments must look much farther ahead than they do now. An
increasing number of western countries are planning their public
finances on a basis of three to five years, but this is nowhere near
enough, argues Mr Heller. They need to incorporate a long-range
perspective (of at least 25 years and preferably more) into their
budgets. Second, these projections should be vetted by independent
agencies such as America's Congressional Budget Office, because of
governments' tendency to see the silver lining and not the cloud....
That links to an IMF publication, Who
Will Pay? Coping with Aging Societies, Climate Change, and Other
Long-Term Fiscal Challenges:
7:41:45 PM 
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