Budget Blues: The Fiscal Outlook and Options for Reform

Alan J. Auerbach,
Alan Auerbach Headshot
Alan J. Auerbach Robert D. Burch Professor of Economics and Law - Economics Department, UC-Berkeley, Director - Robert D. Burch Center for Tax Policy and Public Finance
Peter R. Orszag,
Peter R. Orszag Vice Chairman of Investment Banking, Managing Director, and Global Co-Head of Healthcare - Lazard
Samara R. Potter, and William G. Gale
William G. Gale The Arjay and Frances Fearing Miller Chair in Federal Economic Policy, Senior Fellow - Economic Studies, Co-Director - Urban-Brookings Tax Policy Center

May 1, 2003


Establishing a sustainable fiscal policy is central to the nation’s long-term economic
prospects, but requires a clear understanding of how past and current policies affect future
resources. The federal budget should, but does not, provide this information, both because the
task is difficult and current accounting practices are deficient. This paper shows that adjusting
the official budget for many accounting and economic issues implies a bleak fiscal outlook that
presents policymakers with difficult choices. We also explore options to restore fiscal
sustainability directly and to improve the budget process that governs fiscal decisions.