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OECD Economic Surveys: United States 2007

image of OECD Economic Surveys: United States 2007
This edition of OECD's periodic survey of the US economy assesses recent economic developments and examines challenges the US faces including employment limits that are slowing economic growth, fiscal sustainability, household debt, improving primary and secondary education, and financing higher education. This book includes StatLinks, URLs under tables and graphs linking to Excel® spreadsheet files containing the underlying data.

"Has an international bureaucracy ever made so much sense in so few words? If so, I missed it."-Greg Mankiw

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Ensuring fiscal sustainability

The recent improvement in federal government finances reflects surprisingly buoyant tax receipts rather than discretionary measures, with public spending as a share of GDP remaining on a rising trend. The new official target of balancing the unified federal budget by 2012 is the minimum, given the bleak longer-term fiscal outlook. Reintroduced budget rules may be helpful in achieving it. But reforming entitlement programmes is the main imperative. Under current law, public spending on retirement and health care is projected to approach by the middle of the century a fifth of GDP (equivalent to current total federal expenditure). Soaring budget deficits would entail a government debt that could reach twice the size of GDP at that time. The situation is particular worrying for health care programmes, where cost pressures compound the effect of population ageing. Whether revenues need to be increased will depend on the success in curbing spending. But tax reform is desirable in any case with a view to enhancing economic efficiency.

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