One is also known as the 'full-employment deficit' alluded to below.
The other is a projection forward in time, given the maintenance of current policy. There are different ways to define "current policy," but that's a separate matter. Under this definition, employment is not assumed to be constantly 'full,' but to reflect average extent of unemployment spread evenly over the projection period. In other words, if I'm projecting ten years out, I decide how many months of recession and low employment there will be and average that out over the decade. The resulting revenues and expenditures of the Gov follow from this economic assumption.
Hence projecting the 'full-employment' deficit or surplus forward would yield a better economic and fiscal profile than the standard estimates of structural budget surpluses or deficits. Over a decade this would not make a giant difference, but over a longer period of projection it would.
mbs
Rakesh wrote:
I thought the structural deficit is a measure of what the deficit would have been had there been full employment however defined. What this has to do with the sustainability of more deficit spending (already jeopardizing the credit standing of the Japanese govt) is unclear to me.
Me:
Sure, but given that definition, the structural deficit indicates the potential for fiscal recovery--i.e Japan's ability to pay, given its current resources, used to capacity.
I don't disagree that both the U.S. and Japan are in positions that are unsustainable, in the long run. I don't bet on crises to precipitate political changes in either the short or long run. Crises can be used for such things, of course. But people still have to be organized, beforehand, for this to happen. Besides, it's not who predicts the crisis before hand who wins; it's who can win the post-crisis struggle over the meanings attributed to it.
All best Christian