Back Matter

Back Matter

Author(s):
Peter Heller
Published Date:
November 2003
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    References

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      Missale, Alessandro,1999, Public Debt Management (Oxford, United Kingdom: Oxford University Press).

      Moss, David A.,2002, When All Else Fails: Government As the Ultimate Risk Manager (Cambridge: Harvard University Press).

      Munich Re Group, 2001, Annual Review: Natural Catastrophes 2001 (Munich).

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      National Public Radio, 2002, “New Orleans’ Hurricane Risk” (Washington), September20.

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      New Zealand, Climate Change Programme, 2002, National Communication 2001: New Zealand’s Third National Communication under the Framework Convention on Climate Change (Wellington).

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      New Zealand, The Treasury, 2001a, Note on NZ Super Fund (Wellington).

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      Organization for Economic Cooperation and Development, 2001b, Best Practices in Budget Transparency (Paris).

      Organization for Economic Cooperation and Development, 2001c, “Public Management Service,”Public Management Newsletter, Vol. 21 (September), p. 8.

      Organization for Economic Cooperation and Development, 2001d, Revenue Statistics 1965–2000 (Paris).

      Organization for Economic Cooperation and Development, 2002, Analytical Database (Paris).

      Palmer, Edward,2001, “Sweden’s New Pension System,”testimony before the Subcommittee on Social Security of the U.S. House Committee on Ways and Means, July31.

      Penner, Rudolph G.,2001, Errors in Budget Forecasting (Washington: Urban Institute).

      Pindyck, Robert S.,1991, “Irreversibility, Uncertainty, and Investment,”Journal of Economic Literature, Vol. 29 (September), pp. 110048.

      Pinfield, Chris,1998, “Tax Smoothing and Expenditure Creep,”New Zealand Treasury Working Paper 98/9 (Wellington: The Treasury, New Zealand).

      Pisani-Ferry, Jean,2002, “Balancing the Stability Pact,”Financial Times (London), June28.

      Posner, Paul L., and Bryon S.Gordon,2001, “Can Democratic Governments Save? Experiences of Countries with Budget Surpluses,”Public Budgeting and Finance, Vol. 21 (Summer), pp. 128.

      Quinet, Alain, and PhilippeMills,2001, “How to Allow Automatic Stabilizers to Operate Fully?: A Policymaker’s Guide for EMU Countries,”paper presented at the Third Workshop on Public Finance, Fiscal Rules 1-3 (unpublished; Rome: Banca d’Italia).

      Ramsey, Frank,1928, “A Mathematical Theory of Savings,”The Economic Journal, Vol. 38, No. 152 (December), pp. 54359.

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      Reuters World Service, 2002, “South Korea Drafts Extra Budget of Typhoon Relief,”Reuters World Service, September9.

      Riley, Barry,2002, “Victims of the Slide,”Financial Times, August5, p. 20.

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      Samuelson, Robert,2002b, “Corrosion of Confidence,”Washington Post, June12, p. 31.

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      UBS Warburg, 2002, “Euro Area Demographics—Delivering a “Win-Win” Economy?”European Area Structural Issues Monitor, No. 1. Available via the Internet: www.ubswarburg.com/economics.

      United Kingdom, Department for Environment, Food, and Rural Affairs, 2002, Climate Change Scenarios for the United Kingdom (London).

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      United Kingdom, H.M. Treasury, 2000, “Long-Term Fiscal Projections,” in The Budget 2000 (London).

      United Kingdom, H.M. Treasury, 2001a, Macroeconomic Frameworks for the Twenty-First Century (London).

      United Kingdom, H.M. Treasury, 2001b, “Illustrative Long-Term Fiscal Projections,” in The Budget 2001 (London).

      United Kingdom, H.M. Treasury, 2002, Long Term Public Finance Report: An Analysis of Fiscal Sustainability (London: Controller of Her Majesty’s Stationery).

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    Index

    • Aaron, Henry, perspectives on long-term forecasting, 93, 95–97

    • Africa, climate change and, 39; young component of the population, 13. See also specific regions and countries.

    • Aggregate approach to fiscal policy planning

      • addressing long-term concerns through fiscal policy, 100–108

      • balanced budget approach, 178, 186, 190

      • conflicts of interest and, 185

      • fiscal gap filling approach, 178, 183–184, 186, 190

      • government debt and, 185

      • governments’ flexibility and, 193

      • limits on further sustained cutbacks in expenditure, 190, 192, 225

      • limits on increasing the tax burden, 186

      • maintaining the state’s capacity for action, 192–193

      • political economy difficulties sustaining tight fiscal policy, 180–185

      • prefunding long-term obligations and, 182–183, 225–226

      • programmatic reforms as a complement to, 226

      • Ricardian equivalence effects, 179–180

      • scope for higher tax burdens, 188–190

      • signaling role of commitment reform, 226

      • size of obligations and, 201

      • sufficiency of, 177–202

      • weaknesses in existing fiscal rules, 193–201

    • Aging of the population. See Population aging

    • Agriculture

      • economic pressure source, 39

      • global climate change and, 20, 21

      • shares of world population in 2025 in countries with water scarcity (figure), 31

      • shrinking agricultural land, 30

    • Algeria, elderly population increase, 13

    • Allocative efficiency of revenue and expenditure policies

      • citizens’ acceptance of prefunding as protection against multiple risks and, 134–135

      • deadweight losses, 133, 134, 135–136

      • distortions of higher tax rates, 136

      • information requirements of a tax smoothing approach, 135

      • maximum acceptable tax rates, 135n

      • tax smoothing, 133–136

      • trade-offs, 136

    • Alvarado, Jose, stochastic forecasting, 77, 162

    • Analytical approaches to fiscal policy planning

      • accuracy of budget forecasting, 160

      • actuarial calculations of the NPV of net benefits of social transfer schemes and, 163

      • balance sheet approaches, 61–64

      • development of indicators of key fiscal imbalances, 163

      • extending the scope of, 160–163

      • fiscal gap indicators and, 161

      • futures studies, 83

      • general-equilibrium models and, 162

      • generational accounting, 73, 74–76

      • historical analyses, 161–162

      • limitations, 60, 223–224

      • long-term discount rate and, 163

      • medium- to long-run projections, 64–68

      • need for assessments of the scope for change in budget structures, 162–163

      • overlapping-generation, multicountry general-equilibrium models, 73, 80–83

      • stochastic forecasting, 73, 76–80, 161–162

      • strengthening analytical techniques, 224

      • synthetic indicators of sustainability, 68–73

      • time-path analyses, 160–161, 203

    • Andersen, Torben Juul, government mitigation of disasters, 209

    • Asia, demographic transition, 40. See also specific regions and countries.

    • Atkinson, Paul, functional classification of expenditure, 192

    • Attanasio, Orazio P.,

      • capital flow impact, 217–218

      • overlapping-generation, multicountry general-equilibrium models, 81, 82

    • Auerbach, Alan J.

      • country-specific studies of generational accounting, 73–74

      • government deferral of reform until a crisis emerges, 213

      • model of government decision making under uncertainty, 140

    • Australia

      • asset accumulation as a percent of GDP, 183

      • Charter of Budget Honesty, 86, 123–124

      • fiscal impact of aging industrial country populations, 16

      • Intergenerational Report, 123–124

      • long-term budget planning, 84, 86, 165

      • medium-term fiscal framework within the formal budget process, 84

      • pension benefits, 204–205

      • tax burden limit, 189

      • technological change and health treatments, 32n

    • Austria, insurance coverage for flood losses, 207n; medium-term fiscal framework within the formal budget process, 84

    • Balance sheet approaches to fiscal policy planning

      • explicit or contingent liabilities and, 62–63

      • hazards and complexities, 63–64

      • principal focus, 61

    • Balassone, Fabrizio, Italy’s expenditure consolidation, 148

    • Bangladesh, population increase projection, 13

    • Banks, James, analytical differences with the generational accounting approach to fiscal planning, 75–76

    • Barnhill, Theodore, study of Ecuador’s short-term vulnerability to financial crises, 119, 214, 216

    • Barro, Robert, public debt risk management practices, 117–118

    • Beckerman, Wilfred

      • costs of global climate change to future generations, 7n

      • low-income countries’ investment in technologies to control carbon emissions, 129

      • rights of unborn generations, 121n, 128n

    • Belgium, adverse legacy of national debt, 148

    • Berz, Gerhard, climate change projections, 20

    • Blanchard, Olivier J., “tax gap” indicator, 69, 70

    • Bogaert, Henri, “recommended primary surplus” definition, 69–70

    • Bohn, Henning, public debt and asset management, 214; tax smoothing, 135

    • Bovine spongiform encephalitis, globalization and, 207

    • Bradbury, Simon, “precautionary” tax in New Zealand, 135n

    • Brazil, HIV/AIDS and, 35

    • Brixi, Hana Polackova

      • government debt management practices, 119

      • independent agency for budget oversight, 173

      • public debt and asset management, 214

    • Brooks, Rodney, technological change in medicine in the next half century, 33

    • Brumby, Jim, “precautionary” tax in New Zealand, 135n

    • Bryant, Ralph, extension of general-equilibrium models to include climate change considerations, 83

    • Budget process. See also Analytical approaches to fiscal policy planning; Domestic budget processes for fiscal policy planning; Government role in fiscal policy planning

      • accrual accounting and, 167–169

      • analytical perspective on sustainability and, 166–167

      • building long-term planning into, 163–177, 224

      • clarifying key sources of expenditure pressure, 169–170

      • establishing an independent fiscal agency, 176

      • estimating the long-term fiscal consequences of new budget initiatives, 165–166

      • fiscal gap indicators and, 166–167

      • fiscal rule-based approaches, 177

      • governments’ contingency provisions for coping with self-insurance or reinsurance role, 171–172

      • governments’ liabilities to those already receiving pensions, 167–168

      • independent assessment of, 173, 224–225

      • limiting precommitments, 227

      • multilateral surveillance for, 173–174

      • public debate and, 175–176, 223

      • risks to which the government might be exposed and, 170–172

      • safeguarding the interests of future generations and, 176–177

      • strengthening accounting concepts relating to government debt, 167–169

      • strengthening the budget document to take account of the long term, 164–172

      • time horizon for, 164–165

      • transparency and, 165, 167, 224

    • Buiter, Willem, “primary gap” indicator, 69

    • Buti, Marco, challenges faced by countries with high public debt-to-GDP ratios, 196

    • Canada

      • asset accumulation as a percent of GDP, 183

      • long-term budget planning, 87

      • medium-term fiscal framework within the formal budget process, 84

      • sources of long-term fiscal pressure (table), 232–237

    • Caribbean region, sources of long-term fiscal pressure (table), 238–241

    • Catastrophic events. See Extreme weather events; Terrorist attacks and other catastrophic events

    • CBO. See U.S. Congressional Budget Office

    • Center for Strategic and International Studies, fiscal impact of aging industrial country populations, 18; studies on the fiscal implications of aging populations, 13n

    • Chand, Sheetal, unfunded pension liabilities in industrial countries, 70

    • China

      • climate change and, 39

      • HIV/AIDS and, 35

      • increase in the elderly population, 12

      • sources of long-term fiscal pressure (table), 268–272

    • CIA. See U.S. Central Intelligence Agency

    • Climate change. See Global climate change

    • Club of Rome, limited availability of resources, 46

    • Computer viruses, 34, 207

    • Conceptual issues

      • dealing with political obstacles, 141–145

      • dynamic nonlinearities, 149, 155

      • financial sustainability assessment, 125–127

      • improving allocative efficiency, 133–136

      • intergenerational fairness, 128–133

      • legacy effects of past policies, 147–148

      • market reactions to fiscal reform, 145–147

      • risk management, 136–141

      • short- to medium-term stabilization objectives, 127–128

      • social welfare function, 121–124

    • Congo, Dem. Rep. of, population increase projection, 13

    • Credit rating agencies, global capital markets and, 115–116; stabilization objectives and, 127–128

    • Credit Suisse-First Boston, assessment of the impact of aging trends on the global capital market, 115

    • Creedy, John, stochastic forecasting, 77, 162

    • CSIS. See Center for Strategic and International Studies

    • Cutler, David M., deadweight losses, 134

    • Czech Republic, insurance coverage for flood losses, 207n

    • Davis, Nick

      • deadweight losses, 134

      • estimate of New Zealand’s financial asset holdings, 183

      • fiscal impact of aging industrial country populations, 18

      • public debt and asset management, 214

      • stochastic forecasting, 77

      • tax smoothing, 144n

    • Dawkins, Richard, technological change in medicine in the next half century, 33

    • Delbecque, B., “recommended primary surplus” definition, 69–70

    • Demographic changes

      • divergent treatment by the U.S. Social Security Administration and the U.S. Census Bureau in their construction of demographic scenarios, 68n

      • fertility rates, 11, 12–13, 39, 48, 79, 211–212

      • immigration and, 212

      • increase in world population, 12–13

      • life expectancy, 1, 11, 39, 49, 52

      • population aging, 11–19

      • social insurance commitments, 14–19

      • stochastic forecasting and, 77–78

      • uncertainty about interactions between policy variables and economic and demographic variables, 53

      • uncertainty within existing economic and demographic models, 48–50

      • youth bulge, 1, 13, 39

    • Denmark

      • asset accumulation as a percent of GDP, 183

      • increasing demand for leisure among workers, 146n

      • long-term budget planning, 87

      • medium-term fiscal framework within the formal budget process, 84

      • tax burden, 193

    • Deutsche Bank, analysis of the dynamics of age-related burdens, 149

    • Developing countries. See Economies in transition; Emerging market economies; specific countries

      • capital flow impact, 218–219, 228–229

      • economic impact of climate change, 21, 39, 219–220

      • financing by expatriate workers, 159

      • implicit commitments, 157

      • increase in elderly population, 19

      • labor market developments and “brain drain” from, 159

      • limiting budget precommitments, 227

      • population growth, 36

      • population pressures for migration from, 29, 159, 229

      • pressure on governments to absorb unemployed youth into the military, 37

      • social insurance commitments, 40

      • social time preference rate and, 129, 132, 160

      • sustainability assessments, 158–159

      • urbanization and, 30, 39–40

    • Discount rate, implications of uncertainty about, 50, 51, 163; social welfare function and, 121

    • Disney, Richard, analytical differences with the generational accounting approach to fiscal planning, 75–76

    • Domestic budget processes for fiscal policy planning, 92–94

      • adaptations to government accounting systems, 88–92

      • difficulty of providing financially for events that have a small probability of occurring, 93

      • prevailing practices, 84–88

      • problematic nature of forecasting results, 92–93

      • public debate and fiscal policy, 92

      • weak link between long-term projections and balance sheet assessments of a government’s liabilities, 93

    • Economies in transition, demographic shifts, 12, 39; social insurance systems, 39. See also specific countries.

    • Ecuador, study of short-term vulnerability to financial crises, 119, 214, 216

    • Edwards, Ryan, public’s views on risk and political decision making, 139; stochastic forecasting, 200

    • Egypt

      • elderly population increase, 13

      • pensions for public employees, 40

      • population increase projection, 13

    • Elderly population. See also Population aging; Young persons

      • dependency ratio, 212

      • increase in, 1, 11–19

      • medical and long-term care for, 49, 156, 205

      • perception of themselves as having accrued certain rights, 128

      • projected shares of elderly in total population by world region (figure), 12

    • Emerging market economies. See also specific countries

      • capital market crises, 159

      • demographic shifts, 12, 40

      • growth of financial burden comparable with industrial countries, 40

      • increase in elderly population, 1, 19

      • social insurance, 40, 112

      • sustainability assessments, 158–159

    • England, Robert, fiscal impact of aging industrial country populations, 17

    • EPA. See U.S. Environmental Protection Agency

    • Ethiopia, population increase projection, 13

    • Europe, sources of long-term fiscal pressure (table), 242–246. See also specific regions and countries.

    • European Commission

      • assessment of the impact of aging trends on the global capital market, 115

      • biases against pro-growth investments, 197–198

      • Economic Policy Committee’s study on the long-run challenges facing countries with aging populations, 70

      • fiscal impact of aging industrial country populations, 16

      • studies on the fiscal implications of aging populations, 13n

    • European Union. See also Stability and Growth Pact

      • annual submission of Stability and Convergence Programmes to the Economic and Financial Council, 94, 97

      • budget surveillance, 174

      • concern that fiscal policies might jeopardize the prospect for maintaining a common currency, 101–102

      • difficulties in sustaining a tight fiscal policy stance, 181

      • fiscal consolidation of “pioneer” and “laggard” countries, 148

      • fiscal gap indicator estimates, 157–158

      • fiscal gap problems, 197, 199

      • forecasts of country outlays on age-related social expenditure programs, 66

      • GDP-weighted surplus gap, 194

      • member countries’ obligation to submit to annual surveillance assessments of their economies, 94

      • migration and the working-age population in, 212

      • standardization and, 28

      • virtual fund for payouts for the “biggest disasters,” 208

    • Ewald, Paul W., technological change in medicine in the next half century, 34

    • Explicit fiscal commitments

      • definition, 43

      • government discretion and, 43

      • “hardness” of, 44

      • pension and deposit insurance, 43

      • unemployment insurance, 43

    • Extreme weather events

      • European floods, 206

      • fiscal implications, 21, 24–25, 130, 206

      • global costs of (figure), 24

    • Fabling, Richard

      • deadweight losses, 134

      • estimate of New Zealand’s financial asset holdings, 183

      • fiscal impact of aging industrial country populations, 18

      • public debt and asset management, 214

      • stochastic forecasting, 77

      • tax smoothing, 144n

    • Financial sustainability assessments

      • broadening the scope of the assessment, 155–158

      • current policy targets and, 125

      • external vulnerabilities, 158–160

      • fiscal gap indicators, 157–158, 161, 166–167

      • political economy dimension, 125

      • questions policymakers should pose, 126–127

    • Fiscal gap indicators

      • budget process and, 166–167

      • financial sustainability assessments and, 157–158

      • stochastic forecasting and, 161

    • Fiscal policy framework

      • building the long term into the budget process, 163–177

      • fiscal rules and, 152

      • geopolitical tensions and, 220

      • policy coordination role, 216–220

      • population aging and, 217–219

      • public debt and asset management, 214–216

      • restructuring a government’s policy commitments, 202–214

      • spillover effects on other countries, 29, 153, 174, 228

      • strengthening the analysis of long-term fiscal sustainability, 153–163

      • sufficiency of the aggregate approach, 177–202

    • Fiscal policy planning. See Analytical approaches to fiscal policy planning

    • Fiscal rules

      • biases against pro-growth investments, 197–199

      • biases arising from the absence of accrual accounting, 196–197

      • concept and application of, 101–104

      • countercyclical fiscal policy and, 181–182, 200

      • fiscal rule-based approaches to the budget process, 177

      • government’s freedom in responding to adverse shocks and, 183

      • higher tax rates and, 201

      • institutional mechanisms to support, 104–108

      • limitations, 152

      • maintaining short- to medium-term fiscal policy and, 202

      • practicalities of adhering to, 195–196

      • public debt, 214

      • stochastic forecasting and, 200–201

      • tailoring to a country’s situation, 193–195

      • uncertainty issues, 200–201

      • variable, 103–104

      • weaknesses in, 193–201

    • Fiscal sustainability, analysis of long-term

      • arguments for bringing longer-term developments into the picture, 154–155

      • ensuring a long-term focus, 153–155

      • extending the scope of analytical approaches, 160–163

      • medium-term approach, 153–154

      • strengthening sustainability assessments, 155–160

      • time frame and, 153–154

    • Fitch Ratings IBCA, assessment of the impact of aging trends on the global capital market, 115

    • Foot-and-mouth disease, globalization and, 207

    • Fottinger, Wolfgang, intergenerational concerns about public debt, 102

    • France, medium-term fiscal framework within the formal budget process, 84; tax ratio, 189

    • Frederiksen, Niels Kleis

      • estimates of the adjustment in the primary balances needed in 19 OECD countries to achieve sustainability, 70

      • fiscal impact of aging industrial country populations, 17

      • GDP-weighted surplus gap, 194

      • long-term debt reduction arising from sustainable fiscal consolidation, 183

    • Freeman, Paul K., tailoring financial instruments to the shocks a country is likely to face, 215

    • Futures studies, description, 83

    • GA. See Generational accounting

    • GAO. See U.S. General Accounting Office

    • General-equilibrium models, market resistance and, 146; saving and investment rates and, 52–53. See also Overlapping-generation, multicountry general-equilibrium models.

    • Generational accounting

      • calculation of generational imbalance, 75

      • country-specific studies, 73–74

      • description, 73

      • misleading nature of, 75

      • usefulness of, 75

    • Germany

      • closed airspace costs associated with the September 11 terrorist attacks, 208

      • insurance coverage for flood losses, 207n

      • medium-term fiscal framework within the formal budget process, 84

    • Giddens, Anthony, manufactured risks and globalization, 211

    • Global capital markets. See also Market reactions to fiscal reform

      • baby-boom generation and, 159

      • credit rating agencies and, 115–116

      • market interest rates, 115

      • risk premiums embedded in long-term interest rates and, 117

    • Global climate change

      • adapting to, 23–24, 219–220

      • agriculture and, 20

      • considerations, 19, 39

      • economic impact, 20–21, 39

      • effects of abrupt change, 211

      • extreme weather events and, 21, 24–25, 130, 206

      • fiscal implications, 20–26, 39, 155, 206

      • impact on mean temperature and/or precipitation in the world’s poorest countries, 130

      • low-probability, high-consequence climatic events, 25–26, 54

      • mitigation efforts, 25, 227

      • population increase and, 20

      • projected amount of temperature warming, 19–20

      • projected climate change indicators (figures), 22

      • public sector subsidies and transfers and, 23–24

      • Rio Treaty’s requirement that governments prepare national climate change assessment reports, 88

      • sea level changes, 21

      • uncertainty about the dimensions of, 1–2, 47, 209–210

      • uncertainty about the future rate of technological progress related to, 139

      • weaknesses in the knowledge base concerning dynamics and economic consequences of, 219

    • Global political tension and heightened insecurity

      • demand for petroleum, 37

      • demand for water, 36–37

      • income inequalities, 35–36

    • Global Trends 2015; types of threats the United States will face, 37–38

    • Globalization

      • capital mobility, 29, 217–218, 228–229

      • Internet and, 26, 28

      • manufactured risks and, 211

      • migration from developing countries, 29, 159, 229

      • pressure for public infrastructure investment, 28–29

      • pressure for standardization, 28

      • risks from, 207

      • spillovers from bad policies in one country, 29, 153, 174, 228

      • tax issues, 26

    • Gokhale, Jagadeesh, long-term fiscal imbalance estimate for the United States, 68

    • Goldman Sachs, assessment of the impact of aging trends on the global capital market, 115

    • Gordon, Bryon S., public saving rates, 165

    • Government role in fiscal policy planning. See also Restructuring a government’s policy commitments

      • accrual accounting system and, 88

      • accumulating resources in financial “lockboxes,” 59, 104–108, 144, 177

      • adaptations to government accounting systems, 88–92

      • addressing long-term concerns through aggregate fiscal policy, 100–108

      • analytical approaches, 59–83, 223–224

      • assessment of long-term sustainability of a fiscal position in a broad and probabilistic way, 56–57

      • benefit parameter reforms, 110–111

      • certainty of some structural changes, 221, 222

      • changes in the quality or quantity of benefits or in the extent of coverage, 111–112

      • commitment reform, 112

      • common features of developments in, 2–3

      • concept and application of fiscal rules, 101–104

      • debt-service obligation projection, 155–156

      • deferring action, 3–4, 113–114, 154–155

      • domestic budget processes, 84–94

      • durability of the government’s policy framework, 157

      • expenditure policy rationalization and tax reform, 113

      • financing parameter reforms, 109

      • how government policies take long-term issues into account, 123, 222–223

      • identifying key risks underlying budget projections, 170–172

      • indicators for clarifying long-term fiscal issues, 164

      • medical care, 32

      • multilateral surveillance of government budgets, 94–100

      • need for a multipronged approach to, 223

      • perspectives of different schools of thought, 7–9

      • political economy difficulties in sustaining a tight fiscal policy stance, 180–185

      • preemptive action, 112–113

      • public debt and risk management, 117–119

      • quantifying the cost of contingent liabilities, 89–92

      • questions policymakers should pose about the sustainability of their commitments, 126–127

      • reinsurance, 24–25

      • relying on the market, 115–117

      • response to adverse events, 42

      • restructuring specifics, 6–7

      • “risk maps” for financial vulnerability to potential catastrophe, 171

      • sectoral fiscal rules, 102–103

      • specific policy reforms, 108–113

      • strengthening accounting concepts relating to government debt, 167–169

      • uncertainty and, 227–228

      • variable fiscal rules, 103–104

    • Greece, asset accumulation as a percent of GDP, 183

    • Group of Ten, studies on the fiscal implications of aging populations, 13n

    • Guest, Ross S., increase in consumption per capita, 7n

    • Hassett, Kevin A.

      • government deferral of reform until a crisis emerges, 213

      • model of government decision making under uncertainty, 140

    • Health care

      • demand for sophisticated medical care from politically influential middle- and upper-income groups, 40

      • government provision of public medical insurance to retired workers, 90

      • high expectations about the standard and quality of care, 50, 205

      • industrial country commitments to, 14, 156, 205

      • medical and long-term care for elderly persons, 49, 156, 205

      • rate of medical care inflation, 50

      • technological change impact, 32–34

    • Hewitt, Paul, fiscal impact of aging industrial country populations, 17

    • HIV/AIDS

      • adverse implications for the human capital base, 130

      • economic impact, 35, 130

      • globalization and, 207

      • lack of long-term forecasts for, 55

      • lowered life expectancy and, 1

      • prevention programs, 113

      • vaccine for, 35

    • Holland, John H., technological change in medicine in the next half century, 33

    • Holzmann, Robert, pension debt levels relative to GDP, 40; pension-related debt, 62

    • Howe, Neil, “Aging Vulnerability Index,” 18

    • Hungary, government loan guarantees, 89

    • Immigration, political regime shifts and, 54

    • Implicit fiscal commitments

      • “contingent liabilities” or “state guarantees,” 44

      • debt arising from, 155–156

      • definitions, 44

      • flexibility that governments have in interpreting their implicit commitments, 45

    • India, population increase projection, 13; young component of the population, 13

    • Indus River, tensions surrounding the demand for water, 37

    • Industrial countries. See also specific regions and countries

      • “baby bust” following the baby boom, 60

      • capital flow impact, 217–219, 228–229

      • credit rating agencies’ assessment of the impact of aging trends on the global capital market, 116

      • economic impact of climate change, 20–21

      • expectations of the government’s role in health care, 156

      • extent to which there is more or less risk to individuals and the choice between the public and private sector, 139n

      • geopolitical tensions and, 220

      • immigration and, 29, 54, 159, 229

      • impact of aging populations, 1, 16–18, 154

      • importance of long-term fiscal issues, 39–41

      • income inequalities and, 36

      • labor market developments and “brain drain” from developing countries, 159

      • long-term quantitative projections of revenue, expenditure, and the overall fiscal balance, 65–68

      • policy commitment effect on future generations, 221

      • response to natural disasters, 156–157

      • social insurance commitments, 14–15, 156

      • study of unfunded pension liabilities in, 70

    • Infectious diseases, economic impact, 35; population pressures for migration from developing countries link to infectious disease outbreaks, 29. See also HIV/AIDS.

    • Insurance

      • adequate pricing of, 171–172

      • development of new insurance products to cover emerging risks, 207

      • DNA tests and genetic risk of major diseases, 32

      • extreme weather events and, 24

      • global capital markets and, 117

      • government provision of public medical insurance to retired workers, 90

      • government role in reinsurance, 24–25

      • terrorism risk insurance legislation in the United States, 38, 208

      • unemployment insurance as an explicit fiscal commitment, 43

    • Inter-American Development Bank, tailoring financial instruments to the shocks a country is likely to face, 215–216

    • Intergenerational fairness

      • country’s present income per capita and, 9, 129–130

      • developing countries’ social time preference rate and, 129, 132

      • identifying which generations need to be considered, 128

      • lack of a single definition of “fairness,” 130–131

      • political nature of, 131

      • public debt burdens and, 132

      • questions governments should seek to answer, 132–133

      • rights of unborn generations, 128n, 129, 222

      • scaling back commitments and, 133

      • tax burden of future generations as compared with current generations, 131, 132

    • Intergovernmental Panel on Climate Change

      • climate change assessment reports, 88

      • frequency and intensity of extreme weather events, 24

      • incidence and impact of climate change, 20

    • International Federation of Accountants, Public Sector Committee’s agreement on an approach for treating public sector social benefit obligations in the public accounts, 91; social benefits definition, 91n

    • International Federation of Red Cross and Red Crescent Societies, decentralization and risk reduction efforts, 210n

    • International Monetary Fund

      • assessment of the impact of aging trends on the global capital market, 115

      • assessments of contingent liabilities, 97–98

      • Code of Good Practices on Fiscal Transparency and fiscal transparency manual, 88, 99–100, 167, 173

      • medium- to long-run projections for fiscal policy planning, 65, 66

      • member countries’ obligation to submit to annual surveillance assessments of their economies, 94

      • sensitivity stress tests, 98–99

      • studies on the fiscal implications of aging populations, 13n

      • surveillance efforts under Article IV and Articles of Agreement, 97, 174

      • views on good practices for realistic fiscal sustainability assessments, 98

    • Internet

      • “comparison shopping” of social insurance benefits and public services offered in different countries, 28

      • growth of, 26

      • measures of global interconnectivity (figure), 27

      • value of business conducted by eCommerce by world region (figure), 27

    • IPCC. See Intergovernmental Panel on Climate Change

    • Iran, elderly population increase, 13

    • Iraq, elderly population increase, 13

    • Ireland, asset accumulation as a percent of GDP, 183; tax burden limit, 189

    • Italy

      • adverse legacy of national debt, 148

      • pension reform, 110, 227

      • social commitment reforms, 205

      • tax ratio, 189

    • Jackson, Harriet, relative merits of alternative measures of the debt-to-GDP ratio, 104n

    • Jackson, Howell E., estimates of the accumulated debt for the U.S. Social Security system, 168

    • Jackson, Richard, “Aging Vulnerability Index,” 18

    • Jaeger, Albert, unfunded pension liabilities in industrial countries, 70

    • Janssen, John, analysis of New Zealand’s long-term fiscal situation, 114; estimate of New Zealand’s fiscal gap adjustment, 70, 72

    • Japan

      • infrastructure investment, 199

      • medium-term fiscal framework within the formal budget process, 84

      • sources of long-term fiscal pressure (table), 268–272

      • tax burden limit, 189

    • Jensen, Svend E.H., deadweight losses, 134

    • Jordan River, tensions surrounding the demand for water, 37

    • Kapner, Suzanne, insurance coverage for flood losses, 207n

    • Keen, Michael, tailoring financial instruments to the shocks a country is likely to face, 215

    • Kilpatrick, Andrew, spending windfalls, 182; stochastic forecasting, 200–201

    • Kopits, George, fiscal rules, 101; study of Ecuador’s short-term vulnerability to financial crises, 119, 214, 216

    • Korea, medium-term fiscal framework within the formal budget process, 84; sources of long-term fiscal pressure (table), 268–272

    • Kotlikoff, Laurence J., country-specific studies of generational accounting, 73–74

    • Kraemer, Moritz

      • analysis of the dynamics of age-related burdens, 149

      • fiscal consolidation of “pioneer” and “laggard” EU countries, 148

      • fiscal impact of aging industrial country populations, 16–17

    • Kyoto Treaty, implementation questions, 219; preemptive action example, 112–113

    • Latin America. See also specific countries

      • demographic transition, 40

      • income inequalities and, 35–36

      • increase in the number of the absolute poor, 2

      • sources of long-term fiscal pressure (table), 238–241

    • Lee, Ronald

      • divergent treatment by the U.S. Social Security Administration and the U.S. Census Bureau in their construction of demographic scenarios, 68n

      • public’s views on risk and political decision making, 139

      • stochastic forecasting, 76–80, 200

    • Legacy of past policy commitments, adverse legacy of national debt, 148; “legacy factor” meaning, 147

    • Leong, Donna, government debt management practices, 118, 214, 215, 216

    • Libya, elderly population increase, 13

    • Life expectancy, 1, 11, 39, 49, 52

    • Lockboxes for earmarked funds, 59, 104–108, 144, 177

    • Long-term care for elderly persons, 49, 156, 205

    • Long-term issues that can be anticipated

      • common effects, 40–41

      • concurrent nature of, 10–11

      • demographic changes, 11–19

      • environmental impact of the scale of global economic activity, 46

      • explicit fiscal commitments, 43–44

      • forecasting uncertainty in the 21st century, 47–55

      • global climate change, 19–26, 39

      • global political tension and heightened insecurity, 35–37

      • globalization, 26–29

      • HIV/AIDS and other infectious diseases, 35

      • identifying the country- or region-specific risk factors, the sources of fiscal pressures, and the key uncertainties, 40

      • implicit and explicit challenges, 41

      • implicit fiscal commitments, 44–45, 155–156

      • rapid technological change, 2, 31–35

      • shrinking agricultural land, 30

      • society’s understanding of the world, 45–46

      • terrorist attacks and other catastrophic events, 37–39

      • transformative issues in the 21st century, 11–39

      • transparency of policymakers’ environment, 46

      • uncertainty about the future and, 42, 45–46

      • urbanization pressures, 30

    • Low-probability, high-consequence climatic events

      • economic impact, 54

      • estimate differences, 54

      • infrastructure and, 25–26

    • Maastricht Treaty, budgetary guidelines, 148; specification for gross public debt limit, 102

    • Mad cow disease, globalization and, 207

    • Mani, Muthukumara, tailoring financial instruments to the shocks a country is likely to face, 215

    • Market reactions to fiscal reform. See also Global capital markets

      • difficulty of determining the range of forces, 147

      • effect of cutbacks in future expenditure, 145, 225

      • general-equilibrium effects, 146

      • negative supply response, 146

      • Ricardian equivalence effects, 145, 147, 179–180

      • side effects of policy actions, 147

      • types of market forces, 146–147

      • vicious circles in market responses, 146

    • McDonald, Ian M., increase in consumption per capita, 7n

    • McFadden, Daniel, Social Security and Medicare redesign, 78

    • McKibbin, Warwick, extension of general-equilibrium models to include climate change considerations, 83

    • Medical care. See Health care

    • Medium- to long-run projections for fiscal policy planning

      • elements, 65–66

      • false precision and, 68

      • forecasts of country outlays on age-related social expenditure programs, 66

      • IMF construction of, 65, 66

      • medium-term horizon of three to five years, 64–65

      • projections that estimate the NPV of fiscal balances over time, 67

      • projections with an infinite time horizon, 67–68

      • sensitivity to underlying assumptions, 67

      • unit-elasticity assumptions, 66

    • Merrill Lynch, assessment of the impact of aging on global capital markets, 115

    • Middle East. See also specific regions and countries

      • income inequalities and, 36

      • limited natural resources as a potential source of economic and political pressure, 39

      • population increase, 13, 36

      • sources of long-term fiscal pressure (table), 251–254

    • Miller, Timothy, stochastic forecasting, 77

    • Mills, Philippe, SGP’s lack of rewards for virtuous behavior in good years, 182

    • Missale, Alessandro, public debt and asset management, 214, 215; public debt risk management practices, 117–118

    • Mody, Ashoka

      • Fiscal Hedge Matrix, 119

      • independent agency for budget oversight, 173

      • public debt and asset management, 214

    • Momigliano, Sandro, Italy’s expenditure consolidation, 148

    • Monacelli, Daniela, Italy’s expenditure consolidation, 148

    • Morocco, elderly population increase, 13

    • Moss, David A., risk management in the United States, 32

    • Multilateral surveillance of government budgets

      • assessments of contingent liabilities and, 97–98

      • IMF, OECD, and European Union countries’ obligation to submit to annual surveillance assessments of their economies, 94

      • IMF’s Code of Good Practices on Fiscal Transparency and fiscal transparency manual, 88, 99–100, 167, 173

      • IMF’s views on good practices for realistic fiscal sustainability assessments, 98

      • peer-group pressure to consider long-term budget issues, 94, 97, 225

      • primary focus, 97

      • stress tests and, 97, 98–99

    • Munich Re Group, insurance industry and September 11 terrorist attacks, 207n; insurance industry’s reliance on retrospective underwriting approaches, 25n

    • Musgrave, Richard, six broad objectives of long-term issues faced by governments, 124

    • Netherlands

      • asset accumulation as a percent of GDP, 183

      • budgetary fiscal rule, 103

      • Economic Structure Enhancing Fund, 103n

      • government loan guarantees, 89

      • medium-term fiscal framework within the formal budget process, 84

    • New Zealand

      • balance sheet approach to fiscal policy planning, 61

      • fiscal gap adjustment estimate, 70, 72

      • Fiscal Responsibility Act, 85, 102, 105

      • fiscal rule approach, 104

      • long-term budget planning, 84, 85, 165

      • Long-Term Fiscal Model projections, 18

      • medium-term fiscal framework within the formal budget process, 84

      • “precautionary” tax, 135n

      • quantifiable and nonquantifiable contingent liabilities appendix to budget, 89

    • New Zealand Superannuation Fund

      • flexibility of design, 85–86

      • investment questions, 106

      • lockbox for, 105–106, 177

      • net asset accumulation separate from the overall budget, 183

      • saving rate and, 108

    • Newell, Richard, uncertainty about the discount rate, 50, 51, 163; weighting of discount factors, 121

    • Nielsen, Søren B., deadweight losses, 134

    • Niger, population increase projection, 13

    • Nigeria, population increase projection, 13

    • Nile River, tensions surrounding the demand for water, 37

    • Nonlinearities in fiscal sustainability dynamics of age-related burdens, 149, 155

      • intensification of the impact of some structural developments, 149

      • medium-term fiscal sustainability and, 149

    • Nordhaus, William D., costs of climate change mitigation, 114

    • North Africa, population increase, 12; sources of long-term fiscal pressure (table), 251–254

    • Norway

      • fiscal constraint relaxation, 183, 184

      • fiscal rule approach, 104

      • Government Petroleum Fund, 102–103, 105, 106–107

    • NZSF. See New Zealand Superannuation Fund

    • OECD. See Organization for Economic Cooperation and Development

    • OLG-GE models. See Overlapping-generation, multicountry general-equilibrium models

    • Organization for Economic Cooperation and Development

      • analysis of the dynamics of age-related burdens, 149

      • assessment of the impact of aging trends on the global capital market, 115

      • Best Practices Code on Fiscal Transparency, 165

      • budget transparency code, 100, 167

      • composition of general government expenditure (table), 191

      • estimates of the adjustment in the primary balances needed in 19 OECD countries to achieve sustainability, 70

      • expenditure profile rationalization, 190, 192

      • fiscal impact of aging industrial country populations, 16

      • forecasts of country outlays on age-related social expenditure programs, 66

      • general government net financial liabilities in OECD countries (table), 184

      • member countries’ obligation to submit to annual surveillance assessments of their economies, 94

      • overlapping-generation, multi-country general-equilibrium models and, 81

      • studies on the fiscal implications of aging populations, 13n

      • survey of debt management practices, 118

      • tax ratios, 186, 187

    • Overlapping-generation, multicountry general-equilibrium models

      • description, 73

      • feedback effects on critical fiscal variables, 82–83

      • interest rate sensitivity and, 81, 82–83

      • policy reforms and moderation of the projected diminution in the growth of incomes per capita, 82

      • population aging and, 80–83

      • saving and investment and, 81–82

      • simplified grouping of the world economy and, 80–81

    • Pacific region, sources of long-term fiscal pressure (table), 268–272. See also specific countries.

    • Pakistan, population increase projection, 13; young component of the population, 13

    • Palacios, Robert, pension debt levels relative to GDP, 40; pension-related debt, 62

    • Pasek, Joanna

      • costs of global climate change to future generations, 7n

      • low-income countries’ investment in technologies to control carbon emissions, 129

      • rights of unborn generations, 121n, 128n

    • Penner, Rudolph G., information value of long-term forecasts, 160; perspectives on long-term forecasting, 93, 95–97

    • Pensions. See also New Zealand Superannuation Fund

      • benefit parameter reforms, 110–111, 227

      • benefit transfers and, 169

      • clawback provisions, 110

      • commitment reform, 112

      • developing countries and, 40

      • expected replacement rate of a state-provided pension estimate, 169

      • as explicit fiscal commitments, 43

      • governments’ liabilities to those already receiving pensions, 167–168

      • industrial country commitments to, 14

      • PAYGO systems, 60, 61–62, 103, 112, 133–134, 156

      • pension-related debt, 62

      • population aging and, 61–62

      • prefunding long-term obligations and, 182–183

      • projected government pension and health spending, selected OECD countries (figure), 14

      • scaling up of minimum pension benefits in the United Kingdom, 44

      • social welfare function and, 122

      • tax issues, 15

    • Petroleum, tensions surrounding the demand for, 37

    • Pinfield, Chris, consequences of “expenditure creep,” 144n; tax smoothing, 181n

    • Pizer, William, uncertainty about the discount rate, 50, 51, 163; weighting of discount factors, 121

    • Political obstacles to fiscal reform

      • budget crises and, 143

      • complexity of the political economy, 143

      • decision making entities, 141–142

      • differing motives of multiple agents, 142

      • difficulty of sustaining policy decisions with a long-term focus, 144

      • discipline in fiscal decision making and, 144–145

      • electorate’s realization of its role in determining its own and its children’s future, 143

      • generalizations about the political economy of any country, 142–145

      • impact of actions on the personal interests of different groups within the electorate, 142–143

      • mechanisms for addressing, 144

      • pressure on governments to address long-term fiscal issues, 142

    • Population aging. See also Elderly population

      • age-related trends in public expenditure, 69–70

      • aggregate fiscal policy and, 100–108

      • conclusions of recent studies on the fiscal impact of aging industrial country populations, 16–18

      • credit rating agencies and, 115

      • dependency burden, 203

      • economic effects beyond the government budget, 15, 18

      • encouragement of increased fertility and, 211–212

      • fiscal implications, 13–15, 154

      • fiscal policy challenges, 18–19

      • generational accounting approaches to fiscal planning, 73, 74–76

      • immigration pressures and, 212, 217, 229

      • increase in the number of elderly persons, 1, 11, 13

      • motivating factor for policies to limit government’s net debt, 84

      • overlapping-generation, multicountry general-equilibrium models, 80–83

      • potential variability of fertility rates and, 79

      • rapid economic growth and, 18

      • saving and investment rates and, 52–53, 81–82

      • uncertainties related to, 217

      • unemployment and, 18

    • Posner, Paul L., public saving rates, 165

    • Public debt

      • aggregate approach to, 185

      • asset management and, 214–216

      • bond market and, 216

      • catastrophe bonds and, 215–216

      • fiscal rules and, 214

      • government debt management practices, 118, 119, 214, 215, 216

      • intergenerational fairness and, 132

      • rising risk premiums on, 224

      • risk management and, 117–119, 137

      • strengthening accounting concepts relating to government debt, 167–169

      • tailoring financial instruments to the shocks a country is likely to face, 215–216

      • uncertainties about, 214–215

    • Public welfare systems

      • industrial country commitment to, 14

      • overlapping-generation, multicountry general-equilibrium models and, 82

      • pensions and, 64

    • Quinet, Alain, SGP’s lack of rewards for virtuous behavior in good years, 182

    • Raffelhuschen, Bernd, country-specific studies of generational accounting, 73–74

    • RAND Corporation

      • “globalization” definition, 29n

      • Internet risks and vulnerability, 34

      • technological breakthroughs possible through 2015, 31–32

    • Rees, Martin, vulnerability to terrorism, 38–39

    • Republic of Korea

      • demand for sophisticated medical care from politically influential middle- and upper-income groups, 40

      • government emergency assistance after the typhoons of 2002, 24n

    • Restructuring a government’s policy commitments

      • broadening policy approaches, 211–212

      • creation of new policy structures to reduce and manage risk, 202–203

      • deferring reform until a crisis emerges, 213–214

      • as a means to ensure that the state remains relevant, 202

      • reducing and managing risk, 206–211

      • scaling back, 203–206, 213

      • specifics of, 6–7

      • welfare objective implications, 212–213

    • Retirement, age for, 14, 49, 196, 212. See also Pensions.

    • Ricardian equivalence effects, 145, 147, 179–180

    • Rio Treaty, obligation of governments to prepare national climate change assessment reports, 88

    • Risk management. See also Insurance

      • consequences of a government’s approach to, 138

      • current and future electorates and, 140

      • extent to which there is more or less risk to individuals and, 139n

      • future spending on public goods and redistributive transfers, 138

      • governments’ need to deal with genuine uncertainty, 141

      • how governments communicate with and involve the public and, 208–209

      • independent pressures that may weigh on a government’s approach to, 140

      • infrastructure investment and, 209, 210–211

      • interdependence of countries and, 228

      • moral hazard considerations, 208

      • political economy considerations, 140

      • public debt policies and, 137

      • public’s views on risk and, 138–139

      • restructuring a government’s policy commitments and, 206–211

      • risk of inconsistency in a country’s policies over time, 140–141

      • types of risks governments may encounter, 137–138, 223

    • Russia, HIV/AIDS and, 35

    • SARS. See Severe acute respiratory syndrome

    • Saving and investment rates, cutbacks in future expenditures and, 145; population aging and, 52–53, 81–82

    • Scarth, William, relative merits of alternative measures of the debt-to-GDP ratio, 104n

    • Schelling, Thomas C., costs of global climate change to future generations, 7n; low-income countries’ investment in technologies to control carbon emissions, 129

    • Schick, Allen

      • budget battles of the future, 142–143

      • extending the time frame of a budget, 155, 157, 165

      • flexibility in the countercyclical use of fiscal policy, 193

      • government debt management practices, 119

      • perspectives on long-term forecasting, 93, 95–97

      • survey of government accounting practices, 89

    • Schieben, Sylvester, fiscal impact of aging industrial country populations, 17

    • Scobie, Grant H., stochastic forecasting, 77

    • Sea level changes, 21

    • September 11 terrorist attacks

      • demand effects on economies, 29

      • effects on specific industries, 29

      • fiscal implications, 38, 206

      • Germany and closed airspace costs associated with, 208

      • government compensation to victims, 45

      • governments’ response to, 42, 117

      • insurance industry and, 207n

      • National Intelligence Council study of the risk of a terrorist attack, 54

      • U.S. General Accounting Office review of studies of, 209n

    • Severe acute respiratory syndrome economic impact, 35

    • SGP. See Stability and Growth Pact

    • Shoven, John, capital accounting for the U.S. Social Security trust fund, 168

    • Singapore, demand for sophisticated medical care from politically influential middle- and upper-income groups, 40

    • Skilling, David, “precautionary” tax in New Zealand, 135n

    • Slovak Republic, insurance coverage for flood losses, 207n

    • Smetters, Kent, long-term fiscal imbalance estimate for the United States, 68

    • Smith, Zoe, analytical differences with the generational accounting approach to fiscal planning, 75–76

    • Social insurance

      • aging population and government spending on pensions and health, 14–19

      • “comparison shopping” via the Internet, 28

      • debt arising from a government’s commitments to, 156

      • defined-benefit systems, 91

      • developing countries and, 40

      • disclosure of accrued liabilities and, 168

      • economies in transition and, 39

      • legislated policy commitments to, 41

      • medium- to long-run projections for fiscal policy planning and, 65–66

      • projected government pension and health spending, selected OECD countries (figure), 14

      • quantifying the annual accrual of social benefit obligations by a government, 89–92

      • scaling back on commitments to, 203–206

    • Social welfare function

      • capacity for implementation and, 124

      • description, 121

      • discount rate and, 121

      • distribution across generations, 123–124

      • government’s approach to risk and uncertainty and, 124

      • government’s role, 122–123

      • individual’s utility as a function of consumption, 122

      • interests of future generations and, 121–123

      • key factors on how government policies take account of long-term issues, 123

      • rights of unborn generations, 121n

      • risk and, 122

      • “state of the world” probability function, 122n

      • sustainability and, 124

    • South Africa, elderly population increase, 13

    • South Asia. See also specific countries

      • HIV/AIDS and, 35

      • income inequalities and, 36

      • increase in the number of the absolute poor, 2

      • limited natural resources as a potential source of economic and political pressure, 39

      • population increase, 12, 36

      • sources of long-term fiscal pressure (table), 259–262

    • Southeast Asia, sources of long-term fiscal pressure (table), 263–267. See also specific countries.

    • Soviet Union, former, sources of long-term fiscal pressure (table), 247–250. See also specific countries.

    • Spain, asset accumulation as a percent of GDP, 183

    • Stability and Growth Pact

      • accrual accounting and, 197

      • capital expenditure treatment, 198–199

      • fiscal implications of aging and, 174

      • fiscal policy constraints and, 28, 181–182

      • fiscal policy safety margin requirement, 128

      • fiscal rules and, 101–102, 104, 181–182

      • flexibility of, 193–194

      • long-run challenges facing countries with aging populations, 70

      • sufficiency of, 195–196

    • Stabilization objectives, credit rating agencies and, 127–128; fiscal policy safety margins and, 128

    • Standard & Poor’s, analysis of the dynamics of age-related burdens, 149; assessment of the impact of aging trends on the global capital market, 115, 116

    • Stochastic forecasting

      • aggregative fiscal rules and, 200–201

      • description, 73

      • development of, 76

      • fiscal gap indicators and, 161

      • historical analyses and, 161–162

      • interest rates and, 79

      • key sources of uncertainty and, 79

      • methodology, 76–77

      • multiplicity of fiscal risks and, 161

      • objective of, 76

      • relative probability of adverse outcomes and, 79–80

      • strength and importance of, 78

    • Stress tests, 67, 97, 98–99

    • Sub-Saharan Africa

      • HIV/AIDS and, 35

      • income inequalities and, 35

      • increase in the number of the absolute poor, 2

      • population increase, 12

      • sources of long-term fiscal pressure (table), 255–258

    • Sudan, elderly population increase, 13

    • Sustainability. See Fiscal sustainability, analysis of long-term; Financial sustainability assessment; Synthetic indicators of sustainability

    • Sweden

      • medium-term fiscal framework within the formal budget process, 84

      • Multi-Year Budget Framework, 87

      • pension reform, 110, 111, 227

      • social commitment reforms, 205

    • SWF. See Social welfare function

    • Switzerland, tax burden limit, 189

    • Symansky, Steven, fiscal rules, 101

    • Synthetic indicators of sustainability

      • age-related trends in public expenditure and, 69–70

      • aggregative nature of, 72

      • biased perspective of, 73

      • deficiencies and weaknesses of gap indicators, 72–73

      • equilibrating the present value of the long-term budget constraint faced by a government, 69

      • fiscal sustainability in OECD countries: primary fiscal balance approach (table), 71

      • intergenerational tradeoffs, 70, 72

      • value of, 70, 72

    • Tax issues

      • distortions of higher tax rates, 136

      • equilibrium payroll tax rate and Social Security, 78

      • expenditure policy rationalization and tax reform, 113

      • generational accounting and, 75–76

      • globalization and, 26, 55

      • intergenerational fairness and, 131, 132

      • investment of surpluses to avoid tax hikes, 133–134

      • limits on increasing the tax burden, 186

      • marginal tax rates, 8–9

      • maximum acceptable tax rates, 135n

      • pensions, 15

      • political regime shifts and, 53–54

      • public debt risk management practices and, 117–118

      • questions policymakers should pose about the sustainability of their commitments, 126–127

      • scope for higher tax burdens, 188–190

      • social welfare function, 123

      • tax competition, 26, 145

      • tax rates as a debt-equilibrating factor, 67

      • tax ratios in OECD countries, 186, 187

      • tax smoothing, 117–118, 133–136, 139, 178, 186

      • technological change and health treatments, 32n

    • Technological change

      • areas to be affected by, 31

      • computer viruses and, 34, 207

      • DNA tests and genetic risk of major diseases, 32

      • health care, 32–34

      • potential for acts of destruction and, 34–35

      • productivity growth and, 34

      • risk of software or hardware breakdowns and, 34

      • speculating on technological change in medicine in the next half century, 33–34

      • technological breakthroughs possible through 2015, 31–32

    • Terrorist attacks and other catastrophic events. See also September 11 terrorist attacks

      • catastrophe bonds, 215–216

      • fiscal ramifications, 38

      • probability of, 38

      • “risk maps” for financial vulnerability to potential catastrophe, 171

      • vulnerability to, 38–39

      • weapons of mass destruction and, 37–38

    • Tigris-Euphrates Rivers, tensions surrounding the demand for water, 37

    • Tuljapurkar, Shripad, divergent treatment by the U.S. Social Security Administration and the U.S. Census Bureau in their construction of demographic scenarios, 68n

    • Tunisia, elderly population increase, 13

    • Turner, Dave, non-OECD regions’ demand for capital, 218; overlapping-generation, multicountry general-equilibrium models, 80–83

    • UBS Warburg, assessment of the impact of aging trends on the global capital market, 115

    • Ukraine, HIV/AIDS and, 35

    • UN. See United Nations

    • Unborn generations’ rights, 121n, 128n, 129, 142

    • Uncertainties in the 21st century

      • within existing economic and demographic models, 48–50

      • expected changes in underlying models, 50, 52

      • general-equilibrium effects, 52–53

      • interactions between policy variables and economic and demographic variables, 53

      • “lamppost” approach, 55

      • political regime shifts, 53–54

      • probability distribution, 54–55

      • unforeseeable events, 55

    • United Arab Emirates, elderly population increase, 13

    • United Kingdom

      • adjustments to the indexation formula and, 110–111

      • Code for Fiscal Stability, 85

      • debt management, 215

      • Financial Services Authority’s warning about the risks to insurance companies associated with long-term annuity products, 92

      • fiscal rule approach, 104

      • “Golden Rule” for a balanced current budget, 85, 102, 196, 198, 199

      • long-term budget planning, 84, 85, 165

      • medium-term fiscal framework within the formal budget process, 84

      • National Health Service strengthening, 112

      • pension benefits, 44, 63–64, 136, 157, 204–205

      • requirement that the social insurance payroll contribution rate be adjusted to ensure the system’s financing on a PAYGO basis, 103

      • Sustainable Investment Rule, 102, 198

      • tax burden limit, 189

    • United Nations

      • fertility rate projections, 13

      • migration and the working-age population in the European Union, 212

      • population increase projections, 13

    • United Nations Development Programme, scope for expanded provision of global public goods, 220

    • United States

      • accrued costs not reflected in the U.S. budget, 168–169

      • actuarial calculations of the NPV of net benefits of alternative social transfer schemes, 163

      • climate change and, 39

      • compensation for farmers in the Midwest for weather-related losses, 23–24

      • difficulties in sustaining a tight fiscal policy stance, 181

      • expiration of the Budget Enforcement Act, 87

      • fiscal rule approach under the Clinton and Bush administrations, 104

      • long-term budget planning, 84, 86–87

      • long-term fiscal imbalance estimate, 68

      • Medicare cost as a fraction of GDP, 78

      • medium-term fiscal framework within the formal budget process, 84

      • population increase projection, 13

      • private financing of health care, 188

      • sources of long-term fiscal pressure (table), 232–237

      • stochastic forecasting for demographic and economic variables, 77–78

      • subsidy cost of a government guarantee for direct loans, 89

      • tax burden limit, 189

      • terrorism risk insurance legislation, 38, 208

      • types of threats the United States will face in the future, 37–38

    • Urbanization, developing countries and, 30, 39–40; projected population of world’s largest megacities (figure), 30

    • U.S. Census Bureau, divergent treatment by the U.S. Social Security Administration and the U.S. Census Bureau in their construction of demographic scenarios, 68n

    • U.S. Central Intelligence Agency futures studies, 83

      • identification of possible situations that are sources of economic and political concern, 55

      • National Intelligence Council study of the risk of a terrorist attack, 54

    • U.S. Congressional Budget Office

      • assessment of the long-term finances of the U.S. Social Security system, 77

      • baseline analyses for a 75-year fiscal projection period, 87

      • independent budget scorekeeper role, 173

      • stochastic forecasting models, 77–78

    • U.S. Environmental Protection Agency, adapting to climate change, 20; U.S. Climate Action Report, 10n, 19n

    • U.S. General Accounting Office

      • accrued costs not reflected in the U.S. budget, 168–169

      • establishment of triggers signaling when the costs of existing budget exposures exceed a predetermined amount, 175–176

      • “implicit exposures” definition, 44

      • need for the government to provide a list and description of fiscal exposures, 170

      • review of studies of the impact of the September 11 terrorist attacks, 209n

    • U.S. Health Care Financing Administration, stochastic forecasting models, 77–78

    • U.S. National Intelligence Council, Global Trends 2015, 37–38

    • U.S. Social Security Administration

      • divergent treatment by the U.S. Social Security Administration and the U.S. Census Bureau in their construction of demographic scenarios, 68n

      • long-term projection mandate, 66

      • stochastic forecasting models, 77–78

    • U.S. Social Security system

      • capital accounting for the trust fund, 168

      • Congressional Budget Office’s assessment of the long-term finances of the Social Security system, 77

      • equilibrium payroll tax rate, 78

      • estimates of the accumulated debt for the U.S. Social Security system, 168

      • financing parameter reform example, 109

      • fiscal sustainability issue, 107–108

      • forecasting when the trust fund will be exhausted, 160

      • lockbox for, 177

      • payroll contribution rate and benefit amounts set to yield actuarial balance over a 75-year period, 103, 104

      • stochastic approach for appraising, 200

      • trust fund as an autonomous budget entity, 107–108

    • van den Noord, Paul, functional classification of expenditure, 192

    • Violante, Giovanni L., capital flow impact, 217–218; overlapping-generation, multicountry general-equilibrium models, 81, 82

    • Weapons of mass destruction, types of threats the United States will face in the future, 37–38

    • Weather. See Extreme weather events; Global climate change

    • Weitzman, Martin L., uncertainty about the discount rate, 50, 51, 163; weighting of discount factors, 121

    • Welfare systems. See Public welfare systems

    • WMD. See Weapons of mass destruction

    • Yemen, population increase projection, 13

    • Young persons. See also Elderly population

      • in developing countries, 1, 13, 36

      • pressure on developing country governments to absorb unemployed youth into the military, 37

      • projected increase in, 13

    • Zviniene, A., pension debt levels relative to GDP, 40; pension-related debt, 62

    About the Author

    Peter S. Heller received his BA from Trinity College (USA) in 1967 and his doctorate in economics from Harvard University in 1971. After teaching for six years at the University of Michigan, he joined the International Monetary Fund, where he is now the Deputy Director of its Fiscal Affairs Department. He has written and lectured extensively on policy issues relating to economic development, fiscal policy, pensions, government expenditures, taxation, health care for developing countries, privatization, climate change, and aging populations. He was also an active participant in the 2002 World Health Organization-sponsored Commission on Macroeconomics and Health. He has written many papers relating to the Far East, Southeast Asia, and Africa. At the IMF, he has led or participated in missions to virtually every part of the world.

    Policymakers today confront a number of profound developments, whose significance is certain to increase over the next several decades. Some of these are widely anticipated: demographic and climate change, the scarcity of natural resources, and public health. Other structural issues, such as globalization, rapid technological change, and security threats, will continue to transform the world economy.

    Who Will Pay? makes the case that, despite the fact that generating debate, let alone action, on such thorny issues is not easy, governments need to enact policy changes now to take account of the potential fiscal consequences of these developments. Who Will Pay? argues that a multipronged approach is vital, involving strengthened analyses, greater attention to long-term issues and risk factors in the budget framework, institutional reforms that try to address the myopic political economy biases of politicians and the public, and a blend of aggregate belt tightening and sectoral policy reforms.

    “…Peter Heller brings a breath of fresh air to this claustrophobic debate, arguing that we need to look ahead to the looming budgetary challenges…. He sounds the alarm that failing to anticipate the long-run challenges will leave both present and future generations at risk of punitive tax hikes and/or arbitrary losses of benefits and essential public services as catastrophic spending crowds out everything else. Sound the call in Washington and around the world: listen to Heller!”

    William Easterly

    Professor of Economics, New York University and

    Senior Fellow, Center for Global Development

    “Peter Heller has made a critical contribution with this book. Political leaders in this day are perilously short-sighted. This book helps us all see into a troublesome future, but with a perspective that can help policy makers avoid the worst that might lie ahead.”

    John J. Hamre, President and CEO,

    Center for Strategic and International Studies

    More endorsements for Who Will Pay? may be found inside (pp. iii-v).

    Who Will Pay?

    Coping with Aging Societies, Climate Change, and Other Long-Term Fiscal Challenges

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