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Seven Unsustainable Processes: Medium-Term Prospects and Policies for the United States and the World

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  • Wynne Godley
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    Abstract

    The purpose of the paper is not to make short-term predictions about the life expectancy of the current economic expansion in the United States, but to determine if the present stance of fiscal and trade policy is appropriate looking to the medium turn. The expansion has been generated by economic processes that are unsustainable--processes in private saving, private borrowing, and asset prices that have fueled the growth of demand against a negative impetus both from fiscal policy and from net export demand. Given unchanged fiscal policy and the consensus forecast for growth in the rest of the world, continued expansion requires that private expenditure continue to expand relative to income on a record and growing scale, and it seems impossible that this source of growth can be forthcoming indefinitely, although it may well continue into next year. When private demand falters, it will be necessary to bring about a substantial relaxation of fiscal policy and to ensure that there is a structural improvement in the United States's balance of payments.

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    Paper provided by Levy Economics Institute, The in its series Economics Strategic Analysis Archive with number 99-10.

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    Date of creation: Oct 1999
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    Handle: RePEc:lev:levysa:99-10

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    1. James Tobin & Willem H. Buiter, 1974. "Long Run Effects of Fiscal and Monetary Policy on Aggregate Demand," Cowles Foundation Discussion Papers 384, Cowles Foundation for Research in Economics, Yale University.
    2. Brunner, Karl & Meltzer, Allan H., 1978. "Public policies in open economies," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 9(1), pages 1-4, January.
    3. Blinder, Alan S. & Solow, Robert M., 1973. "Does fiscal policy matter?," Journal of Public Economics, Elsevier, vol. 2(4), pages 319-337.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. The US economy: hurtling towards another crisis
      by Rotten Apple in Macro Business on 2011-03-22 00:57:01
    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    Cited by:
    1. Dimitri B. Papadimitriou & L. Randall Wray, 2007. "The April AMT Shock: Tax Reform Advice for the New Majority," Economics Policy Note Archive 07-1, Levy Economics Institute, The.
    2. Philip Arestis & Malcolm Sawyer, 2003. "Reinventing Fiscal Policy," General Economics and Teaching 0306004, EconWPA.
    3. Philip Arestis & Malcolm Sawyer, 2003. "The Case for Fiscal Policy," General Economics and Teaching 0306005, EconWPA.
    4. Marc Lavoie, 2001. "Endogenous Money in a Coherent Stock-Flow Framework," Macroeconomics 0103007, EconWPA.
    5. Stephanie Bell, 2000. "Functional Finance: What, Why, and How?," Macroeconomics 0004031, EconWPA.
    6. Wynne Godley & Alex Izurieta, 2001. "The Developing U.S. Recession and Guidelines for Policy," Economics Strategic Analysis Archive 01-10, Levy Economics Institute, The.
    7. Passarella, Marco, 2011. "The two-price model revisited. A Minskian-Kaleckian reading of the process of 'financialization'," MPRA Paper 32033, University Library of Munich, Germany.
    8. Casadio, Paolo & Paradiso, Antonio, 2010. "Private sector balance, financial markets, and U.S. cycle: A SVAR analysis," MPRA Paper 28105, University Library of Munich, Germany.

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