The fiscal gap is a comprehensive measure of our government’s indebtedness. It is defined as the present value of all projected future expenditures, including servicing outstanding official federal debt, less the present value of all projected future tax and other receipts, including income accruing from the government’s current ownership of financial assets.
He wants to see CBO, OMB, and GAO all report on this measure.
I think I would prefer to see accrual accounting. That is, report the increase in government obligations each year. But the fiscal gap idea might be helpful.
That “Fiscal” is the elephant in the room that requires the constant raising of what is actually a false “debt ceiling.”
“Accrual Accounting” is not likely to to have any effect on legislators as an impediment to the continuation of the long-established practices of expenditures constantly growing at a greater rate than revenues and always exceeding collected revenues.
Regardless of the form of reporting, whether as “Fiscal Gap” or “Accrual Accounting,” to have any fiscal effect would require replacing the fantasy of a “Debt Ceiling.”
We should replace the debt ceiling with an effective mechanism rather than continue that ineffective device.
For a considerable period of time the federal debt has increased at the rate of $60 for each $100 of collected revenues. Quick calculation will show that represents 37.5% (60/160) of all spending has come from increased debt. If the current rate of spending from increasing the debt is approximately 31%, then we are increasing the debt by $45 for each $100 of collected revenues.
If it is necessary to continue increasing the debt at the present rate, or at any established rate, then the authority of the Treasury to issue additional debt should be measured by collected revenues which are established by the ability of the federal government (and congressional will) to extract funds from the private sector.
A recommendation has been made to limit the authority of the Treasury to increase the federal debt in any four fiscal months in excess of specific percentages of collected revenues in the greater of the average of 4 months collected revenues in the preceding fiscal year or in the immediately preceding 4 fiscal months, without application to, and approval by Congress. Those specific percentages can be determined and adjusted for future fiscal periods in order to decrease progressively the rate of increase in the federal debt.
This will require constant attention of Congress and the Treasury. It may require legislation which adjusts appropriations and spending authorizations to conform to the limitations on increases in federal debt.
The authority for increases in federal debt should be tied to the sources for ultimate payment which, absent debasement and inflation, are the revenues that can be, and are, collected by extractions from the private sector.