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Federal Fiscal Rules Calculator

This calculator will estimate key fiscal and economic effects of your fiscal rule specifications.

The baseline is the Long-Term Budget Outlook of the Congressional Budget Office (CBO).

The fiscal rules starting point is the Merrifield-Poulson Rule (MP) described here. That description will inform you which specifications (Specs = model parameters) you can choose in the following windows. Each window offers a default parameter you can leave as is, if you wish.

After you have chosen MP Rule Specs, you can choose what you want the calculator to estimate. For example, you may want to find the Debt/GDP ratio for each year through the last year of the CBO Outlook.

Baseline Economic Growth

To keep US GDP growth at the baseline rate predicted by CBO, keep ‘GRCHG’ =

Reduce GRCHG to 0.99 to increase the baseline growth rate by one percentage point; to 0.98 to increase the baseline growth rate by two percentage points, and so on.

Raise GRCHG to 1.01 to decrease the baseline growth rate by one percentage point; to 1.02 to decrease the baseline growth rate by two percentage points, and so on.

The actual simulated US GDP growth may be higher or lower than the baseline rate based on the dynamic scoring aspects of the calculator.

Occurrence of Recessions

The Baseline is no recessions. To explore the impact of negative GDP growth, change the 0.00 (default value) to 0.03 or more for any year. 0.03 yields negative GDP growth. 0.04 raises the severity of the recession by one percentage point.

Income Tax Rate Changes

The Baseline is no tax rate changes. To explore the impact of tax cuts, change the (default value) 0.00 by +0.01 per one percentage point change in the static revenue loss as a share of GDP for any year; vice versa for higher rates. So, a 0.03 would denote a tax cut equal to 3% of GDP. To explore the impact of tax hikes, change the (default value) 0.00 by -0.01 per one percentage point change in the static revenue gain as a share of GDP for any year; vice versa for higher rates. So, a -0.03 would denote a tax hike equal to 3% of GDP. To test a permanent tax change, make the change, say, from 0.00 to 0.01 for a 1% tax cut, for each year starting with the year the cut is enacted. So, for a 2020 permanent tax cut of 1% of GDP, change the ‘0.00’ to ‘0.01’ in each box starting with the 2020 box.

ASSET Sales and Entitlement Savings

The Baseline is no Savings or Sales. To explore the impact of Sales and or Savings, change the (default value) 0 by $1 per Billion dollars in reduced spending on entitlements (compared to CBO Outlook) and/or Asset sales (by one estimate the Federal Gov’t Owns over $50 trillion in mineral rights).

Cost of Shifting Funds from Private to Public Sector

For example, decreasing the 2019 deficit by $100 Billion increases the 2020 GDP by $6 billion with default Opportunity Cost Rate (OCR) of ; six percent. Change OCR to, say, 0.08 to test an 8% OCR.

Income Tax Revenue = f(GDP)

Based on the National Bureau of Economic Research, is the default value for that connection. Income Tax Revenue changes by 1.576% per 1% change in GDP.

GDP = f(Taxation)

Based on the National Bureau of Economic Research, is the default value for that connection. GDP changes by 1.21% per 1% change in Tax burden.

Multiplier for the Spending Growth Rate Limit

Except when debt or deficit levels trigger fiscal braking, the limit on discretionary spending growth is a multiple (CSLRT) of Population Growth + Inflation.
You can change CSLRT from its default value of to reflect drivers of spending that grow faster than population growth plus inflation. 1.2 is the default value because the populations that drive discretionary spending are arguably growing ~20% faster than total population, and because revenue grows faster than total population. 1.0, 1.1, and 1.3 are good alternate values of CSLRT.

Debt and Deficit-Triggered Braking

The consensus value of Debt Tolerance is 60% of GDP.
The consensus value of Deficit Tolerance is 3% of GDP.
Braking means setting the Spending Growth Rate Limit below the Multiple of Population Growth + Inflation.
Braking commences when Debt or Deficit are 80% of the tolerance rate.
You may also specify a braking rate based on debt and/or based on the most recent deficit .

Interest Rate Change

You can explore the effect of interest rates differing from the CBO Long-Term Outlook.
The default value of Interest Rate Change is . Change that to 0.01 to increase each year’s interest rate by one percentage point.

The Emergency Fund

You can revise the limits on:
A.) Emergency Fund annual deposits - EFMAXDRT = 20% of discretionary funding;
B.) the maximum balance - EFCAPRT = 40% of discretionary funding; and
C.) Average Annual Emergency Fund Spending – the EFSP (in millions of $$) default is 1/24th of 1994-2017 emergency spending.

Countercyclical Spending Bump

The calculator provides for additional spending in negative economic growth times, defined as years with less revenue than the previous year.
The default spending ‘bump’ is half of the revenue decline from the previous year. You can revise that rate.

Personal Income = f(GDP)

There are no personal income projections. So, the calculator sets the future personal income baseline at its most recent value of 85.7% of GDP. (default value)

The Capital Investment Fund

You can revise the limits on: A.) the annual limit for Capital Investment Fund deposits - KFDEPLIM = 1% of discretionary funding; B.) the maximum balance - KFCAP = 4% of discretionary funding and C.) the maximum share of the fund balance – KMAXSH – that can be spent in one year.

Calculator Results

Revised Deficit (-)-1743565.175-1721038.19-1658503.429-1309364.773-1543365.859-1395553.095-1544927.863-1256934.398-1557555.993-1614197.738-1572274.076-1376317.249-1395448.891-1487883.841-1430385.95-1392975.346-1330104.953-1256784.96-1131458.765-1097797.45-960113.412
Revised National DEBTt28695127.69330416165.88232074669.31233384034.08434927399.94336322953.03837867880.90139124815.29940682371.29242296569.03143868843.10745245160.35646640609.24748128493.08849558879.03850951854.38452281959.33653538744.29654670203.06155768000.51156728113.923
Revised DEBTt/GDPt1.2111.2391.2631.2661.2761.2881.2941.2831.2811.2791.2721.2621.2491.2391.2251.2091.1911.171.1471.1231.095
Revised vs. Actual DEBTt1.0351.0351.0361.0291.0181.010.9980.9840.9670.9520.9340.9160.8940.8680.8470.8210.7940.7670.7380.710.682
Revised vs. Actual Deficit1.0761.0381.0510.8920.8170.8490.7860.6890.6760.6850.6190.5590.5010.4590.4670.3920.350.3220.2620.2480.204
Revised Deficit(-)/GDPt-0.074-0.07-0.065-0.05-0.056-0.05-0.053-0.041-0.049-0.049-0.046-0.038-0.037-0.038-0.035-0.033-0.03-0.027-0.024-0.022-0.019
Employment Effects-168489.1-628289.924-1526567.212-1824523.784-1901427.126-3731473.229-4113095.839-4012039.778-3876484.839-3521214.552-2911729.485-2891921.27-2559999.583-2352514.297-1963560.441-1480652.087-1022836.719-215179.806338673.04878136.161847306.717
Revised GF Spend/GDPt0.0960.0930.090.0870.0830.0810.0780.0750.0720.0690.0660.0640.0610.0590.0560.0540.0520.050.0480.0460.044
Revised Tot Sp/GDPt0.2440.2440.240.2250.240.2350.2390.2280.2360.2350.2330.2270.2270.2290.2270.2250.2230.2210.2190.2170.215
Rev GDPt/GDPt Actual0.9990.9970.9930.9920.9910.9830.9820.9820.9830.9850.9880.9880.9890.990.9920.9940.9960.9991.0011.0031.007
Rev vs. Actual GF Sp0.8850.8580.8520.820.780.7650.730.7090.680.6480.6220.60.5710.5490.5230.5040.4890.4670.4480.4270.411