The other chapters in this book tend to focus on one particular area of public policy. Should society devote more resources to helping unskilled workers get job training? Should defense spending increase? Should we provide new tax subsidies for retirement saving? This chapter focuses on a broader, but in some sense more straightforward, question: Once all the individual components and policies are added together, is the government living within its means? Are the set of tax laws that legislators have enacted consistent with the variety of spending programs they have created?

If tax and spending decisions only had implications for the current year, it would be straightforward to determine whether the government was living within its means: One could simply compare revenue and spending in that year. But the economic effects of past and current legislation play out over many years—even decades. As a result, decision makers and the public require a clear understanding of the claims that previously enacted laws and current decisions make on resources not only today but in the future, and on whether laws currently in place commit the government to future taxes that equal, exceed, or fall short of future spending obligations. Indeed, it is difficult to see how intelligent fiscal policy could be made in the absence of such information.

Ideally, the federal budget would provide this information. In practice, it does not, at least partially because of the difficulty of the task itself. But even compared to what is feasible within a timely and understandable budget, current practice falls short of what would be desirable. First, the budget uses assumptions defining current tax and spending policy that are widely regarded as unrealistic. Second, official budget projections employ a ten-year horizon. Practical considerations make some such limit necessary, as projections become increasingly speculative as the horizon lengthens. But such a budget "window" excludes the fiscal effects associated with the aging of the baby boomers, most of which occur well after the next 10 years. Third, even within the 10-year budget window, budget projections are subject to substantial uncertainty, in part because the economic events that affect the projections are difficult to predict accurately.