New Life for Generational Accounting
Senators John Thune (R-SD), Tim Kaine (D-VA), Rob Portman (R-OH), and Chris Coons (D-DE) have introduced the Intergenerational Financial Obligations Reform (INFORM) Act, a bill that would encourage responsible budgeting by increasing the scope of federal budget analysis. The bill would incorporate fiscal gap analysis and generational accounting into CBO analyses of budget bills and at the request of House or Senate Budget Committee Chairmen and Ranking Members for significant non-budget legislation; to the OMB's analysis of Presidential budget proposals; and for the GAO's long-term fiscal outlook. It is very encouraging to see a bipartisan group of lawmakers focus on the long-term impacts of our unsustainable budget path. This proposal would help our elected leaders better understand the consequences of our current trajectory and the effect that proposals could have on future generations. The INFORM Act was initially championed by The Can Kicks Back, a millennial advocacy organization affiliated with the Campaign to Fix the Debt. Fix the Debt released a statement in support of the bill today.
These new analyses would serve two important purposes: issuing a public reminder that unsustainable budgets will leave future generations with an unfair debt burden that will threaten their quality of life and requiring budget agencies to provide Congress and the White House with a tangible and valuable tool for considering the outyear impact of immediate budget decisions. The second point is also important because while the ten-year budget window does matter, it is the longer term that has a much more troubling picture.
Fiscal gap analysis is already a widely-used metric for looking at the long term. Simply put, the analysis calculates the discrepancy between projected revenues and outlays over a longer timeframe, usually up to 75 years, in order to determine the long-term impact of today's budgetary decisions. Fiscal gap projections are used by the Social Security Trustees to predict the outyear fiscal health of the Social Security program and the implications of proposed policy changes.
Generational accounting looks at the net revenue impact of the fiscal gap by comparing what living and future generations will pay in net taxes, or taxes less benefits. This analysis is also not a new concept; the Clinton and George H.W. Bush administrations both used generational accounting in budget proposals.
Sens. Thune, Kaine, Portman, and Coons should be commended for introducing the INFORM Act. The bill demonstrates that Congress has an appetite for increased transparency and accountability in the budget process and understands the importance of a sustainable debt trajectory over the long term.