The United States would need a larger lasting fiscal adjustment than Italy to balance government obligations and receipts, a 2025 study says, even though Italy has more public debt relative to its economy.
Economists Emanuele Dicarlo, Laurence J. Kotlikoff, Mauro Marè and Marco Olivari estimate a U.S. fiscal gap equal to 7.4% of annual GDP, compared with 4.0% for Italy. Those estimates use the authors’ preferred real discount rates: 6% for the U.S. and 4% for Italy.
The fiscal gap is a broader long-term measure. It combines existing government net debt with projected noninterest outlays and receipts, then expresses the lasting adjustment required as a constant share of future GDP. The study also finds a larger U.S. gap when both countries are assessed at a common 2% discount rate.
International Monetary Fund figures show Italy’s gross government debt at 137.1% of GDP in 2025, against 123.9% for the U.S. The U.S. general government deficit was 6.8% of GDP that year, compared with 3.1% in Italy.
Under the authors’ preferred assumptions, closing the U.S. gap through taxes would require an immediate, permanent 26.5% increase in tax receipts. An adjustment through spending alone would require a 23.9% cut in noninterest outlays. Italy’s corresponding estimates are a 7.3% increase in tax receipts or a 7.4% cut in noninterest outlays.
The study highlights Italy’s aging population and weak projected productivity growth. Investment strategist Joachim Klement argued in a March 5 commentary that repeated U.S. tax cuts have added to the country’s receipts problem.
The study says delaying adjustment shifts more of the burden to future generations. In its 2025 baseline, waiting until 2050 to begin a tax-only adjustment raises the estimated increase to 82.0% for the U.S. and 16.4% for Italy.
