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.
2027-01-31 12:25:00 Sunday ET
In recent decades, many governments have chosen to run high fiscal deficits on top of sovereign debt mountains so that greater government intervention still
2018-02-11 07:30:00 Sunday ET
President Trump unveils his ambitious $1.5 trillion public infrastructure plan. Trump proposes offering $100 billion in federal incentives to encourage stat
2018-10-21 14:40:00 Sunday ET
President Trump floats generous 10% tax cuts for the U.S. middle class ahead of the November 2018 mid-term elections. Republican senators, congressmen, and
2017-12-17 11:41:00 Sunday ET
Warren Buffett points out that it is important to invest in oneself. Learning about oneself empowers him or her to lead a meaningful life. This valuable inv
2019-06-15 10:28:00 Saturday ET
The Sino-American trade war may slash global GDP by $600 billion. If the Trump administration imposes tariffs on all the Chinese imports and China retaliate
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