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 â€œuncommitted funds.â€ 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.
|Date of creation:||01 Jan 2002|
|Date of revision:|
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- Henning Bohn, .
"Budget Balance Through Revenue or Spending Adjustments ? Some Historical Evidence for the United States (Reprint 013),"
Rodney L. White Center for Financial Research Working Papers
03-91, Wharton School Rodney L. White Center for Financial Research.
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- Barro, Robert J, 1979.
"On the Determination of the Public Debt,"
Journal of Political Economy,
University of Chicago Press, vol. 87(5), pages 940-71, October.
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