1. The sustainability of Swedish fiscal policy
Thomas Eisensee
Senior Economist

2. The ageing of the population
Demographics:
Lower fertility (TFR 1.85)
Rising longevity (Women 82.5→86.5, Men 78.3 → 83.3)
Immigration (12% foreign born)
Fundamental problem
Fewer workers
More retirees
Implies higher expenditure and lower tax revenue (even at constant taxes)

3. Is Swedish Fiscal Policy sustainable?
The Government provides two answers:
Given taxes and expenditures Central Government gross debt does not increase beyond its present level
The present discounted value of Central Government primary surpluses equals the current level of outstanding debt.

4. Evaluating Fiscal Policy
Sustainability is the ultimate objective
The Expenditure ceiling and the Surplus target are intermediary objectives
An analysis of principle is required: how are the intermediary objectives linked to the ultimate objective?
Some considerations
Several paths for debt are sustainable
Intergenerational equity
Efficiency (tax-smoothing)
There are trade-offs
Future generations are better off
Precautionary savings to meet unexpected shocks to the economy