IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Twin Deficits and Sustainability

Listed author(s):
  • L. Randall Wray

In the mid to late 1980s, the U.S. economy simultaneously producedÑfor the first time in the postwar periodÑhuge federal budget deficits as well as large current account deficits, together known as the Òtwin deficitsÓ (Blecker 1992; Rock1991). This generated much debate and hand-wringing, most of which focused on supposed Òcrowding-outÓ effects (Wray 1989). Many claimed that the budgetdeficit was soaking up private saving, leaving too little for domestic investment, and that the ÒtwinÓ current account deficit was soaking up foreign saving. The result would be higher interest rates and thus lower economic growth, as domestic spendingÑespecially on business investment and real estate construction was depressed. Further, the government debt and foreign debt would burden future generations of Americans, who would have to make interest payments and eventually retire the debt. The promulgated solution was to promote domestic saving by cutting federal government spending and private consumption (Rock 1991; Council of Economic Advisers 2006). Many pointed to JapanÕs high personal saving rates as a model of the proper way to run an economy.

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://www.levyinstitute.org/pubs/pn_3_06.pdf
Download Restriction: no

Paper provided by Levy Economics Institute in its series Economics Policy Note Archive with number 06-3.

as
in new window

Length:
Date of creation: Apr 2006
Handle: RePEc:lev:levypn:06-3
Contact details of provider: Web page: http://www.levyinstitute.org

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as
in new window

  1. Wynne Godley, 1996. "Money, Finance and National Income Determination: An Integrated Approach," Economics Working Paper Archive wp_167, Levy Economics Institute.
  2. John F. Henry & L. Randall Wray, 1998. "Economic Time," Macroeconomics 9811004, EconWPA.
Full references (including those not matched with items on IDEAS)

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:lev:levypn:06-3. 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: (Marie-Celeste Edwards)

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.