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.
2019-04-19 12:35:00 Friday ET
Federal Reserve proposes to revamp post-crisis rules for U.S. banks. The current proposals would prescribe materially less strict requirements for community
2023-10-14 10:32:00 Saturday ET
Jonathan Baker frames the current debate over antitrust merger review and enforcement in America. Jonathan Baker (2019) The antitrust paradi
2018-06-10 19:41:00 Sunday ET
Apple enters a multi-year content partnership with Oprah Winfrey to provide new original online video and TV programs in direct competition with Netflix, Am
2018-09-13 19:38:00 Thursday ET
Bill Gates shares with Mark Zuckerberg his prior personal experiences of testifying on behalf of Microsoft before U.S. Congress. Both drop out of Harvard to
2019-09-11 09:31:00 Wednesday ET
Central banks in India, Thailand, and New Zealand lower their interest rates in a defensive response to the Federal Reserve recent rate cut. The central ban
2019-05-11 10:28:00 Saturday ET
The Trump administration still expects to reach a Sino-U.S. trade agreement with a better mechanism for intellectual property protection and enforcement. Pr