Are Large Deficits and Debt Dangerous?

Michael J. Boskin

AEA Papers and Proceedings, 2020, vol. 110, 145-48

Abstract: The traditional view of large deficits and debt is that they are harmful, save in recession/early recovery, for tax smoothing or to fund productive public investment, as they crowd out private investment and lower future income, and taken to extremes, can cause inflation, even a financial crisis. Blanchard (2019) concludes they may have no fiscal cost and increase welfare. I present evidence of a debt problem, policies necessary to contain it, effects on recovery, interest rates, and long-run growth. There are several serious issues with Blanchard's reading of key data and modeling assumptions, the changing of which would reverse his conclusions.

JEL-codes: E23 E32 E43 E62 H54 H62 H63 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (10)

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DOI: 10.1257/pandp.20201103

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