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The Evolution of Deficits in the United States and Implications for Debt Sustainability

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  • Jesse Bricker
  • William Peterman
  • Rebecca Wasyk

Abstract

The debt-to-GDP ratio is projected to continue to rise due to the primary deficit. This paper models the data generation process for the primary balance by incorporating a rich structure of serial correlation in the innovations to this process by its source (legislative, economic, and technical). We apply this model to debt accumulation, demonstrating that a richer structure for serial correlation leads to wider distributions of debt outcomes with significantly more debt accumulation. Onetime legislative consolidation is less effective at stabilizing the debt ratio than a series of smaller but correlated legislative innovations that are consistent with those in the pre-2000 period.

Suggested Citation

  • Jesse Bricker & William Peterman & Rebecca Wasyk, 2026. "The Evolution of Deficits in the United States and Implications for Debt Sustainability," National Tax Journal, University of Chicago Press, vol. 79(3), pages 759-782.
    • Handle: RePEc:ucp:nattax:doi:10.1086/742262
    DOI: 10.1086/742262
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