IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

How to think about the U.S. budget challenge

  • Henry J. Aaron
Registered author(s):

    The long-term budget prospects of the United States are grim. Projected spending greatly exceeds projected revenue over the next few decades. Projected growth of health care spending accounts for more than all of the anticipated gap. Without action to narrow the gap, accumulating deficits will drive up the ratio of debt to GDP. Interest payments will rise correspondingly. At some point, domestic and foreign holders of U.S. debt will come to doubt the capacity of the government to service this debt. At that point, they will demand sharply higher interest rates. The combination of increasing debt and rising interest rates will cause debt service costs to explode. What follows would be some combination of collapsing investment, declining production, debt default, and inflation-in brief, a calamitous mess. That such a mess will occur is certain if budget deficits as large as those currently anticipated are realized. Precisely when is impossible to forecast accurately.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://hdl.handle.net/10.1002/pam.20536
    File Function: Link to full text; subscription required
    Download Restriction: no

    Article provided by John Wiley & Sons, Ltd. in its journal Journal of Policy Analysis and Management.

    Volume (Year): 29 (2010)
    Issue (Month): 4 ()
    Pages: 883-891

    as
    in new window

    Handle: RePEc:wly:jpamgt:v:29:y:2010:i:4:p:883-891
    Contact details of provider: Web page: http://www3.interscience.wiley.com/journal/34787/home

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:wly:jpamgt:v:29:y:2010:i:4:p:883-891. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)

    or (Christopher F. Baum)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.