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Recent Evidence on Budget Deficits and National Savings


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  • James M. Poterba
  • Lawrence H. Summers


This paper examines the recent United States experience with sustained budget deficits and concludes that the events of the last five years cast significant doubt on the proposition that the timing of taxes does not affect national savings. Rather than raising private saving, the recent deficits have if anything coincided with reduced saving and increased consumption. These findings suggest that realistic analysis of fiscal policies must recognize that consumers are liquidity constrained and/or myopic.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2144.

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Date of creation: Apr 1990
Date of revision:
Publication status: published as "Finite Lifetimes and the Effects of Budget Deficits on National Saving." From Journal of Monetary Economics, Vol. 20, No. 2, pp. 369-391,(September 1987).
Handle: RePEc:nbr:nberwo:2144

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