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Catastrophic Budget Failure

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Listed:
  • Burman, Leonard E.
  • Rohaly, Jeffrey
  • Rosenberg, Joseph
  • Lim, Katherine C.

Abstract

Continuation of current U.S. fiscal policy will lead to an enormous accumulation of debt with potentially disastrous economic consequences. Exacerbated by the recent economic turmoil and fueled by the willingness of creditors to lend at very low interest rates, there is significant risk that necessary fiscal reform will be put off. In this paper, we consider the causes, mechanisms, and macroeconomic fallout of a catastrophic budget failure — a situation in which markets’ perception of the credit worthiness of the U.S. government rapidly deteriorates, leaving it unable to access credit markets at any reasonable rate of interest and generating a high probability of the previously unthinkable: the U.S. government defaulting on its debt obligations.

Suggested Citation

  • Burman, Leonard E. & Rohaly, Jeffrey & Rosenberg, Joseph & Lim, Katherine C., 2010. "Catastrophic Budget Failure," National Tax Journal, National Tax Association;National Tax Journal, vol. 63(3), pages 561-583, September.
    • Handle: RePEc:ntj:journl:v:63:y:2010:i:3:p:561-83
    DOI: 10.17310/ntj.2010.3.07
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    Citations

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    Cited by:

    1. Leonard E. Burman & Marvin Phaup, 2011. "Tax Expenditures, the Size and Efficiency of Government, and Implications for Budget Reform," NBER Working Papers 17268, National Bureau of Economic Research, Inc.
    2. Leonard E. Burman, 2013. "Pathways to Tax Reform Revisited," Public Finance Review, , vol. 41(6), pages 755-790, November.
    3. Bernhardt, Dan & Krasa, Stefan & Mehdi Shadmehr, 2021. "Demagogues and the Fragility of Democracy," QAPEC Discussion Papers 05, Quantitative and Analytical Political Economy Research Centre.
    4. Peña, Guillermo, 2016. "The determinants of banking crises: Further evidence," MPRA Paper 70093, University Library of Munich, Germany.
    5. Zodrow, George R. & Diamond, John W., 2013. "Dynamic Overlapping Generations Computable General Equilibrium Models and the Analysis of Tax Policy: The Diamond–Zodrow Model," Handbook of Computable General Equilibrium Modeling, in: Peter B. Dixon & Dale Jorgenson (ed.), Handbook of Computable General Equilibrium Modeling, edition 1, volume 1, chapter 0, pages 743-813, Elsevier.
    6. John W. Diamond & George R. Zodrow, 2013. "Promoting Growth, Maintaining Progressivity, and Dealing with the Fiscal Crisis," Public Finance Review, , vol. 41(6), pages 852-884, November.
    7. Imtiaz Bhatti & Marvin Phaup, 2015. "Budgeting for Fiscal Uncertainty and Bias: A Federal Process Proposal," Public Budgeting & Finance, Wiley Blackwell, vol. 35(2), pages 89-105, June.

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