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What are the implications of imbalances in generational accounts?
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Money and Power in the Western World: 1700-2000 Final Essay May 2, 2004 Question 1: What are the implications of imbalances in generational accounts? Prepared by: Peter Davis - Pid201 Generational Accounts - The Storm Approaches: Generational accounting is a relatively new area of fiscal focus. In essence, generational accounting attempts to measure the lifetime financial balance of a generational cohort without regard to intra-generational transfers. A fair balance should be close to $0, as any imbalance, either positive or negative, would accrue to a future generation - a consequence of the government's inter-temporal budget constraint. Over the past ~30-years, most major economies have developed severe projected generational account imbalances. Increased transfer payments and changing demographics are largely behind this looming fiscal crisis for many of the world's governments. Three statistics do an excellent job of highlighting the factors contributing to potentially debilitating GA imbalances1, 2: * In the middle of the 20th century approximately 2 per...
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