{
  "title": "Macroeconomic and Welfare Costs of U.S. Fiscal Imbalances",
  "publication": "IMF Working Papers, January 1, 2012",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/31/macroeconomic-and-welfare-costs-of-u-s-25691",
  "canonical": "https://www.imf.org/en/publications/wp/issues/2016/12/31/macroeconomic-and-welfare-costs-of-u-s-25691",
  "overlayPath": "/en/publications/wp/issues/2016/12/31/macroeconomic-and-welfare-costs-of-u-s-25691/index.md",
  "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.",
  "sections": [
    {
      "heading": "Methodology",
      "content": "- Uses a general equilibrium model with heterogeneous agents to assess macroeconomic and welfare consequences in the United States of alternative fiscal policies over the medium-term."
    },
    {
      "heading": "Key findings",
      "content": "- 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.\n- Compared to adopting a reform that gradually reduces federal debt to its pre-crisis level, postponing debt stabilization for two decades would entail:\n  - a permanent output loss of about 17 percent\n  - a welfare loss of almost 7 percent of lifetime consumption\n- The long-run welfare gains from the adjustment would more than compensate the initial losses associated with the consolidation period."
    },
    {
      "heading": "Themes and topics covered",
      "content": "- Consumption\n- Fiscal consolidation\n- Fiscal policy\n- Labor\n- National accounts\n- Public debt\n- Self-employment"
    },
    {
      "heading": "Keywords and technical concepts",
      "content": "- accounting exercise\n- capital income share\n- capital stock\n- closed economy\n- crowding out\n- debt accounting exercise\n- debt ratio\n- equilibrium interest rate\n- fiscal consolidation\n- GDP contract\n- GDP increase\n- government debt\n- growth\n- growth rate\n- interest rate\n- labor income tax rate\n- welfare"
    },
    {
      "heading": "Publication metadata (from the page)",
      "content": "- Authors: Bertrand Gruss, Jose L. Torres\n- Date: January 1, 2012\n- Pages: 35\n- Series: Working Paper No. 2012/038\n- Issue: 038\n- DOI: https://doi.org/10.5089/9781463933814.001\n\nIMF Working Paper by Bertrand Gruss and Jose L. Torres, January 1, 2012.\n\n---\n\n Content in this bundle\n\n- wp1238\n  - wp1238 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - wp1238 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/macroeconomic-and-welfare-costs-of-u-s-25691"
    }
  ],
  "bullets": [
    "[Markdown version](/en/publications/wp/issues/2016/12/31/macroeconomic-and-welfare-costs-of-u-s-25691/index.md)",
    "[Structured JSON version](/en/publications/wp/issues/2016/12/31/macroeconomic-and-welfare-costs-of-u-s-25691/index.json)",
    "[Bundle manifest](/en/publications/wp/issues/2016/12/31/macroeconomic-and-welfare-costs-of-u-s-25691/bundle-manifest.json)",
    "Authors: Bertrand Gruss, Jose L. Torres",
    "Published: January 1, 2012",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781463933814.001",
    "Uses a general equilibrium model with heterogeneous agents to assess macroeconomic and welfare consequences in the United States of alternative fiscal policies over the medium-term.",
    "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:",
    "The long-run welfare gains from the adjustment would more than compensate the initial losses associated with the consolidation period.",
    "Consumption",
    "Fiscal consolidation",
    "Fiscal policy",
    "Labor",
    "National accounts",
    "Public debt",
    "Self-employment",
    "accounting exercise",
    "capital income share",
    "capital stock",
    "closed economy",
    "crowding out",
    "debt accounting exercise",
    "debt ratio",
    "equilibrium interest rate",
    "fiscal consolidation",
    "GDP contract",
    "GDP increase",
    "government debt",
    "growth",
    "growth rate",
    "interest rate",
    "labor income tax rate",
    "welfare",
    "Authors: Bertrand Gruss, Jose L. Torres",
    "Date: January 1, 2012",
    "Pages: 35",
    "Series: Working Paper No. 2012/038",
    "Issue: 038",
    "DOI: https://doi.org/10.5089/9781463933814.001",
    "**_wp1238**"
  ],
  "related": [
    {
      "title": "_wp1238",
      "role": "document",
      "sourceUrl": "https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2012/_wp1238.pdf",
      "summary": {
        "path": "/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2012/_wp1238.pdf.md",
        "mime": "text/markdown"
      },
      "binary": {
        "path": "/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2012/_wp1238.pdf",
        "mime": "application/pdf"
      }
    }
  ],
  "alternates": {
    "markdown": "/en/publications/wp/issues/2016/12/31/macroeconomic-and-welfare-costs-of-u-s-25691/index.md",
    "json": "/en/publications/wp/issues/2016/12/31/macroeconomic-and-welfare-costs-of-u-s-25691/index.json",
    "bundleManifest": "/en/publications/wp/issues/2016/12/31/macroeconomic-and-welfare-costs-of-u-s-25691/bundle-manifest.json"
  },
  "generatedAtUtc": "2026-09-17T17:29:36.615Z"
}