Document Type

Article

Publication Title

Harvard Journal on Legislation

Abstract

As Professor Jackson's article helps to show, two important points about the federal budget have won increasingly wide recognition in recent years. The first is that traditional cash-flow measures cannot provide meaningful budgetary information when the government has taken on huge long-term commitments, such as those under Social Security and Medicare, rather than simply spending discretionary annual appropriations on soldiers and roads. The second is that the current set of policies is unsustainable because the financing behind these policies falls short of the benefits due. The basic problem is that, under current policy, Social Security and Medicare spending, but not their financing, are on track to grow rapidly relative to the economy for many decades to come. This fact reflects pervasive demographic and technological trends toward longer lifespans and more expensive, albeit better, health care. As a result the government will ineluctably be forced, at some point not too far in the future, to enact substantial tax increases or benefit cuts, or both. Current fiscal policy, unfortunately, has since 2001 been headed in precisely the opposite direction, featuring huge tax cuts, a potentially open-ended new Medicare entitlement for prescription drugs, and costly foreign engagements as to which no extra financing is even suggested. Future generations will have to pay the bill for all this. Against this background of inadequate information encouraging unsustainable policies that poor political decisions have made even worse, Jackson's analysis of accounting for Social Security is helpful and illuminating. His basic point about the need for accrual accounting, rather than annualized cash-flow accounting, is so obviously and unanswerably correct that the continued existence, or even prevalence, of skeptics is deeply discouraging. Even those who believe that they are protecting Social Security by insisting on cash-flow accounting are deluding themselves, unless they are indifferent to the program's prospects beyond the very short term. About the only logically coherent reason for favoring continued cash-flow accounting is that it helps to encourage favoring current generations relative to future ones through the enactment of further tax cuts and spending increases. The theory would have to be that current voters are not selfish enough to favor themselves sufficiently relative to future voters unless misleading accounting measures are used to encourage them to ignore the burdens they are leaving for others to meet. Yet it is hard to see why current voters should be discouraged from giving due, or at least some, consideration to the interests of future generations.

First Page

209

Volume

41

Publication Date

2004

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