2018-06-01 07:30:00 Fri ET
treasury deficit debt employment inflation interest rate macrofinance fiscal stimulus economic growth fiscal budget public finance treasury bond treasury yield sovereign debt sovereign wealth fund tax cuts government expenditures
The U.S. federal government debt has risen from less than 40% of total GDP about a decade ago to 78% as of May 2018. The Congressional Budget Office predicts that this ratio will surge to 96% in 2028. Although many blame the Trump tax cuts as the key root cause, the increases in health care and retirement benefits suggest a different real reason for U.S. deficit severity.
Harvard professor Martin Feldstein attributes the recent rise of U.S. budget deficit from 4% to 5% of total GDP to increases in Medicare and social security retirement benefits for middle-class older Americans. These increases in core health care and retirement benefits account for about 2.7% of total GDP. The neoclassical Sargent-Wallace thesis suggests that the central bank cannot finance incessant increases in core deficits with government bond issuance regardless of money supply growth. This money supply expansion would lead to inexorable inflationary pressures that defeat the dual mandate of both maximum employment and price stability in the suboptimal fiscal-monetary policy coordination. Inflation serves as a seigniorage tax that would in turn dampen real macroeconomic variates such as household consumption, capital investment, labor supply, and total economic output. In light of this ripple effect on sustainable financial market growth and prosperity, the law of inadvertent consequences counsels caution.
If any of our AYA Analytica financial health memos (FHM), blog posts, ebooks, newsletters, and notifications etc, or any other form of online content curation, involves potential copyright concerns, please feel free to contact us at service@ayafintech.network so that we can remove relevant content in response to any such request within a reasonable time frame.
2023-07-21 10:30:00 Friday ET
Joseph Stiglitz and Andrew Charlton suggest that free trade helps promote better economic development worldwide. Joseph Stiglitz and Andrew Charlton (200
2019-09-09 20:38:00 Monday ET
Harvard macrofinance professor Robert Barro sees no good reasons for the recent sudden reversal of U.S. monetary policy normalization. As Federal Reserve Ch
2025-07-12 11:35:00 Saturday ET
Mitch Anthony explains why it is now more important for top sales leaders to apply social skills and emotional competences to fulfill customer needs, wants,
2017-01-11 11:38:00 Wednesday ET
Thomas Piketty's recent new book *Capital in the Twenty-First Century* frames income and wealth inequality now as a global economic phenomenon. When
2026-01-19 10:30:00 Monday ET
Andy Yeh Alpha (AYA) fintech network platform: major milestones, key product features, and online social media services Introduction
2019-11-15 13:34:00 Friday ET
The Economist offers a special report that the new normal state of economic affairs shines fresh light on the division of labor between central banks and go