Some Possible Consequences of a U.S. Government Default
AbstractThe U.S. government faces a looming fiscal crisis. A default on Treasury securities appears inevitable. The short-run consequences for the economy will be painful. But the long-run consequences, both economic and political, could be beneficial. The most important long-run political benefit would be the imposition of fiscal discipline. The long-run economic benefit would be the alleviation of the future tax liabilities required to service the national debt, irrespective of whether those liabilities are correctly anticipated or not. A historical examination of the state government defaults of the 1840s provides one case study where the long-run consequences were indeed salutary.
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Bibliographic InfoArticle provided by Econ Journal Watch in its journal Econ Journal Watch.
Volume (Year): 9 (2012)
Issue (Month): 1 (January)
sovereign debt crisis; default; financial crisis; repudiation; U.S. deflation of 1839-1843;
Find related papers by JEL classification:
- G01 - Financial Economics - - General - - - Financial Crises
- H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
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