the government’s debt the same size (relative to the size of the economy) at the end of a given period as it was at the beginning.
An advantage of the “fiscal gap” measure is that it condenses a long-term series of estimates into a single meaningful number that can be used to judge the required scale of corrective action and to compare with gap estimates made at different times or across budgets with different policy components. A disadvantage of the “fiscal gap” measure is the amount of mathematical sophistication required to interpret it.
Using CBO’s “current-law” baseline, Auerbach and Gale (2009) estimated the fiscal gap for the U.S. federal budget baseline in mid-2009 at around 4.4 percent of GDP for projected flows through 2085 and 6.25 percent of GDP if flows are projected over an indefinite horizon. Under alternative assumptions more similar to those used in this report, their estimates of the gap ranged from 7.44 to 9.36 percent.
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