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Eliminating the Federal Budget Deficit Without Recession

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  • F. GERARD ADAMS

Abstract

The federal government's budget deficit of more than $150 billion, some 3 to 4 percent of gross national product, is widely perceived as a serious problem. This article considers policy for wiping out the deficit without recession. Simulations of the Wharton econometric model show that a tax increase would have some slowing effect on the economy but would not cause a recession. Recognition of the possibilities for monetary stimulus, once the deficit is in hand, suggests that the domestic budget deficit can be eliminated without causing an economic slowdown. On the other hand, fixing the domestic budget deficit does not automatically deal with international trade imbalance, which will require other policies and/or international policy coordination in order to be corrected.

Suggested Citation

  • F. Gerard Adams, 1988. "Eliminating the Federal Budget Deficit Without Recession," The ANNALS of the American Academy of Political and Social Science, , vol. 500(1), pages 8-22, November.
    • Handle: RePEc:sae:anname:v:500:y:1988:i:1:p:8-22
    DOI: 10.1177/0002716288500001001
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