##tment act. in each of these cases, the statute was passed some years ago, and the fed has responsibility for writing rules to keep the statute up - to - date. periodically the fed issues advance notices of proposed rulemaking, solicits comments, revises the rules, puts these revisions out for comment, and then adopts final rules. one could imagine a similar process for inflation targeting. for the fed to write rules for a strict inflation - targeting regime on its own would presumably be impossible, though one might interpret " maximum employment, stable prices, and moderate long - term interest rates " as an invitation for the fed to write rules to institute a soft form of inflation targeting. on the whole, this precedential guidance is not very helpful. when it has had opportunities, the congress has never moved ahead on inflation targeting, possibly because of outright opposition, possibly because of a desire for neutral non - involvement. nor have various recent administrations expressed much interest, preferring to leave such matters in the hands of the fed. a fed announcement about inflation targeting would be much more significant than the other more - technical and more - data - oriented announcements or pronouncements the fed normally gives in its monetary policy reports. and for the fed to interpret the broad language of the full employment and balanced growth act as an invitation to write rules instituting a strict form of inflation targeting would be an extreme stretch, though perhaps not for a soft form of inflation targeting. normative considerations granted that there is not much legal precedent for going ahead with inflation targeting on its own, would there be any value in having the fed start a conversation with the congress? left to its own devices, the congress probably will not move ahead on the saxton bill or anything like it. but what if the fed were actually to propose a soft form of inflation targeting? such a proposal might change the dynamics and raise the possibility that the congress could at least tacitly endorse inflation targeting. the advantages of soliciting congressional support for inflation targeting would be essentially those normally ascribed to inflation targeting in the first place. the fed's announcements could become clearer and more transparent, its commitment to price stability could become more universally understood, and market participants could have a better idea of what specifically the fed means by price stability. the present " bias " statement in the fed's announcement of changes in the federal funds rate target could be supplanted with a statement on whether inflation is tending to the upper or lower bound

the economy experienced a mild recession, and the stock market declined for several years after its peak in 2000. a review of federal government outlays - - both on and off budget - - and revenues since the early 1990s helps put the issue in perspective. in the early 1990s, total federal outlays averaged about 22 percent of gdp, while revenues during that period were about 18 percent of gdp. annual deficits were the result. by the late 1990s, outlays declined to under 19 percent of gdp, primarily as a result of significant reductions in defense spending relative to gdp, while revenues, boosted especially by a strong economy and a strong stock market, rose to a high of nearly 21 percent of gdp, thus yielding surpluses. canada experienced an even larger consolidation of its government budget during the 1990s. more recently in the united states, total outlays have climbed back up to almost 20 percent of gdp, while revenue has dropped to about 17 percent of gdp and deficits have reemerged. in contrast to the u. s. fiscal situation, canada has maintained its budget surpluses in recent years. worrisome as these short - term fiscal issues are for the united states, they pale in comparison with the fiscal issues that are projected to begin emerging by the end of this decade. in a few years, the u. s. baby - boom generation will start to retire. thus, the ratio of retirees to workers in the united states is expected to increase rapidly. indeed, this demographic phenomenon is confronting canada and other major developed countries to an even greater degree than that expected in the united states. population aging will put substantial pressure on the u. s. federal government budget, as spending for federal government retirement and health programs will rise rapidly. a more slowly growing workforce could also tend to damp economic growth and, thus, federal tax revenues. so far, solutions to these long - term challenges have eluded policymakers. it is imperative, however, that solutions be identified and implemented. the sooner such changes are made, the less painful and disruptive they will be. of course, i do not want to minimize how difficult these problems will be to solve. the congressional budget office's long - run estimates for the united states indicate that demographic trends would boost federal spending by 5 percentage points of gdp by 2030, and even more thereafter, in the absence of changes to old - age programs. the most important factor in ultimately achieving a federal government budget that balance