Government asset and liability management in an era of vanishing public debt
The paper examines alternative options for managing public debt and public assets in a government balance sheet framework that includes the Treasury, the Federal Reserve, and Social Security. Even after September 11, U.S. fiscal policy is on a trajectory to accumulate substantial "uncommitted funds." The paper examines how such funds should be invested. I conclude that high-quality fixed-income securities are the best benchmark and that Social Security is the most appropriate government asset manager. The analysis of policy alternatives reveals a trilemma between maintaining a liquid Treasury market, minimizing rent seeking, and facilitating intergenerational risk sharing.
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Volume (Year): (2002)
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Rodney L. White Center for Financial Research Working Papers
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