The intergenerational accounting project and the myth of a looming fiscal crisis

From the late 1980s on, many western governments 'discovered' that they will face a major fiscal crisis by the middle decades of this century. They have drawn this conclusion based on forecasts of demographic change, economic growth and public sector deficit dynamics. At least twenty seven countries are now engaging in what is called variously 'generational accounting', or 'intergenerational accounting'. This is a method of national accounting developed by Auerbach, Gokhale and Kotlikoff (1991), which attempts to measure the redistribution of lifetime tax burdens across generations. This analytic framework goes beyond normal government budgeting approaches by trying to take account of projected life-time taxes for a given generation, net of transfers like pensions or benefits.