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.
2019-04-21 10:07:54 Sunday ET
Central bank independence remains important for core inflation containment in the current age of political populism. In accordance with the dual mandate of
2024-07-31 09:28:00 Wednesday ET
In the modern monetary system, each new CBDC helps anchor public trust in money in support of economic welfare, especially in a cashless society. In our
2025-05-21 04:27:10 Wednesday ET
Carol Dweck describes, discusses, and delves into the scientific reasons why the growth mindset often helps motivate individuals, teams, and managers to acc
2020-03-12 09:32:00 Thursday ET
Google CEO Eric Schmidt and his co-authors show the innovative corporate culture and mission of the Internet search tech titan. Eric Schmidt, Jonathan Ro
2020-02-02 11:32:00 Sunday ET
Our fintech finbuzz analytic report shines fresh light on the current global economic outlook. As of Winter-Spring 2020, the analytical report delves into t
2017-01-03 03:26:00 Tuesday ET
President-Elect Donald Trump wants Apple and its tech peers to consider better and greater high-tech job creation in America. Apple has asked its primary