Easterly, WilliamIrwin, TimothyServén, Luis2012-06-052012-06-052007-03https://hdl.handle.net/10986/7191Fiscal adjustment becomes like walking up the down escalator when growth-promoting spending is cut so much as to lower growth and thus the present value of future tax revenues to a degree that more than offsets the improvement in the cash deficit. Although short-term cash flows matter, a preponderant focus on them encourages governments to invest too little. Cash flow targets also encourage governments to shift investment spending off budget, by seeking private investment in public projects-irrespective of its real fiscal or economic benefits. To evade the action of cash flow targets, some have suggested excluding from their scope certain investments (such as those undertaken by public enterprises deemed commercial or financed by multilaterals). These stopgap remedies might sometimes help protect investment, but they do not provide a satisfactory solution to the underlying problem. Governments can more effectively reduce the biases created by the focus on short-term cash flows by developing indicators of the long-term fiscal effects of their decisions, including accounting and economic measures of net worth, and where appropriate including such measures in fiscal targets or even fiscal rules, replacing the exclusive focus on liquidity and debt.CC BY 3.0 IGOACCOUNTINGACCOUNTING STANDARDSACCRUAL ACCOUNTINGADJUSTMENT PROGRAMSAGGREGATE BUDGETAGGREGATE DEMANDASSET VALUEBRIBESBUDGET ALLOCATIONBUDGET DEPARTMENTBUDGET SURPLUSBUDGETARY MANAGEMENTBUDGETARY RESOURCESBURDEN OF TAXATIONCAPITAL ACCUMULATIONCAPITAL EXPENDITURECAPITAL EXPENDITURESCAPITAL NEEDSCAPITAL STOCKCASH DEFICITCASH FLOWCASH FLOWSCOMPETITIVE MARKETSCOMPOSITION OF EXPENDITURESCORPORATE GOVERNANCECOST OF CAPITALCOST RECOVERYDEBTDEBT CRISISDEBT DYNAMICSDEFICIT FINANCEDEFICIT FINANCINGDEFICITSEDUCATION EXPENDITURESEDUCATION SERVICESENTITLEMENTSEXPECTED RETURNSEXPENDITURE CUTSEXPENDITURE ITEMEXPENDITURESFINANCIAL ASSETSFINANCIAL MARKETFINANCIAL REPORTINGFINANCIAL REPORTSFISCAL ADJUSTMENTFISCAL AGGREGATESFISCAL AUSTERITYFISCAL AUTHORITIESFISCAL DEFICITFISCAL DISCIPLINEFISCAL INSTITUTIONSFISCAL PERFORMANCEFISCAL POLICYFISCAL POSITIONFISCAL PROJECTIONSFISCAL RETRENCHMENTFISCAL RULESFISCAL STABILITYFISCAL STANCEFISCAL STIMULUSFISCAL STRATEGIESFISCAL STRATEGYFISCAL TARGETSFUNGIBILITYGOVERNMENT SOLVENCYGROSS DEBTGROWTH OF PUBLIC SPENDINGGROWTH POTENTIALGROWTH RATESHIGHER INTERESTHIGHER INTEREST RATESINDEPENDENT AUDITORINFRASTRUCTURE INVESTMENTINFRASTRUCTURE PROJECTSINFRASTRUCTURE SERVICESINVESTMENT DECISIONSINVESTMENT FLOWSINVESTMENT PROJECTSINVESTMENT RISKLATIN AMERICANLEVEL OF INDEBTEDNESSLIQUIDITYMACROECONOMIC MODELMACROECONOMIC STABILITYMACROECONOMIC STABILIZATIONMARGINAL COSTMARGINAL EXCESSMARGINAL EXCESS BURDENMARKET VALUENET LENDINGNET WORTHPERFORMANCE INDICATORSPERFORMANCE TARGETSPOLITICIANSPOVERTY REDUCTIONPRESENT VALUEPRIMARY DEFICITPRIVATE FIRMSPRIVATE INVESTMENTPRIVATE INVESTORSPRIVATE SECTORPRIVATE SECTOR INVOLVEMENTPRIVATE SECTOR PARTICIPATIONPROFITABILITYPROGRAMSPROVISION OF INFRASTRUCTUREPUBLICPUBLIC CAPITALPUBLIC CONSUMPTIONPUBLIC DEBTPUBLIC ENTERPRISESPUBLIC ENTITIESPUBLIC EXPENDITUREPUBLIC EXPENDITURESPUBLIC FINANCESPUBLIC GOODSPUBLIC INFRASTRUCTUREPUBLIC INVESTMENTPUBLIC INVESTMENT IN INFRASTRUCTUREPUBLIC INVESTMENT PROGRAMPUBLIC INVESTMENT SPENDINGPUBLIC INVESTMENTSPUBLIC PROCUREMENTPUBLIC REVENUESPUBLIC SECTORPUBLIC SECTOR BORROWINGPUBLIC SECTOR BORROWING REQUIREMENTPUBLIC SECTOR NET WORTHPUBLIC SECTOR PROJECTSPUBLIC SECTOR RETRENCHMENTPUBLIC SECTOR SOLVENCYPUBLIC SERVICESPUBLIC SPENDINGREAL INTEREST RATERECURRENT EXPENDITURESREVENUE COLLECTIONREVENUE INCREASESRISK PREMIUMROADSSOCIAL RETURNSOCIAL RETURNSSPENDING CUTSSUB-SAHARAN AFRICATAXTAX BASESTAX COLLECTIONTAX RATETAX REVENUETAX REVENUESTAXATIONTELECOMMUNICATIONSTOTAL SPENDINGTRANSPARENCYUNCERTAINTYUTILITIESWorld Bank10.1596/1813-9450-4158