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(共14张PPT)
DEFICIT FINANCE
Chapter 20
How Big Is the Deficit
Deficit
Surplus
On-budget deficit
Off-budget deficit
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How Big Is the Deficit
Source: Congressional Budget Office [2012b]
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How Big Is the Debt
National (Public) Debt
Stocks vs. Flows
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How Big Is the Debt
Source: Congressional Budget Office [2012b]
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Interpreting Deficit, Surplus, and Debt Numbers
Government Debt held by the Federal Reserve Bank
State and Local Government
Effects of Inflation
Inflation tax
Capital versus Current Accounting
Tangible Assets
Implicit Obligations
Summing Up
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The Burden of the Debt
Statutory versus Economic Incidence
One Hand Borrows from the Other
Internal Debt
External Debt
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Overlapping Generations Model
The Period 2010-2030
Young Middle-Aged Old
(1) Income $12,000 $12,000 12,000
(2) Government Borrowing -6,000 -6,000
(3) Government- provided consumption 4,000 4,000 4,000
The Year 2030
Young Middle-Aged Old
(4) Government raises taxes to pay back debt -4,000 -4,000 -4,000
(5) Government pays back debt +6,000 +6,000
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Overlapping Generations Model
Generational Accounting
Computation of Net Tax
PV of transfers received – PV of taxes paid
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Other Models
Neoclassical Model
Crowding Out Hypothesis
Empirical testing of the hypothesis
Ricardian Model
Intergenerational transfers
Form of Finance is irrelevant
Empirical evidence
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To Tax or To Borrow
Benefits-Received Principle
Intergenerational Equity
Efficiency Considerations
χ = εLt2
Deficits and Functional Finance
Functional finance
Moral and Political Considerations
Federal Debt and the Risk of a Fiscal Crisis
Controlling the Deficit
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Present Value of Tax Payments Under Alternative Taxing/Borrowing Decisions
Policy Year 1 Year 2 All Future Years PV @ 10% interest rate
Spend an additional $100 in year 1 100 0 0 100
Financing Options
Balanced budget: raise 100 in taxes in year 1 100 0 0 100
Deficit Finance I: borrow 100 in year 1 and pay back debt plus interest in year 2 by raising taxes 0 110 0 100
Deficit Finance II: borrow 100 in year 1 and pay interest on debt in all subsequent years always rolling over debt principle 0 10 10 100
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To Tax or To Borrow
Tax rate
Excess Burden
t
2t
χ2
χ1
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Chapter 20 Summary
When government spending > revenues, it must borrow money: debt is the sum of past deficits & surpluses
Economic research centers on whether future generations carry the burden of government debt
Several factors influence whether government should finance expenditures through taxes or debt
From an efficiency point of view, the excess burden of tax vs. debt financing should be considered
Options for controlling the deficit include changing budget-making processes and a constitutional amendment
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