Ibrahim M. Oweiss Lecture, 3rd Annual Carroll Round, Georgetown University

The Legacy of U.S. Fiscal Policy

I am honored to be giving this year's Ibrahim M. Oweiss address, and am extremely impressed by the energy and dedication that the organizers of the Carroll Round have demonstrated in making this outstanding program a reality. The presence of John Nash at this year’s conference only underscores the quality of the programs that you have been able to put together. And I commend all of the student participants here tonight, for your admirable interest in economics and economic policy.

The main point of my talk tonight is that we are at a critical moment in defining the nation's fiscal legacy. Regardless of who wins the November election, debates about making the tax cuts permanent and about entitlement reform will likely be a prominent component of the 2005 agenda in Washington. The outcome of these debates will matter a lot for the world economy and they will matter a lot for you, because you will inherit the consequences. We have become used to thinking about how environmental policy leaves a legacy for future generations. But fiscal policy also leaves a legacy for future generations—in other words, you and your children—and that is what I want to focus on tonight.

I’ll begin by examining the recent history of the macroeconomic savinginvestment balance, then turn to a discussion of projected fiscal deficits over the coming decade, and conclude with some thoughts on longer-term entitlement reform.