Leveraging Posterity's Prosperity?

Johannes Brumm, Laurence Kotlikoff and Felix Kubler

AEA Papers and Proceedings, 2020, vol. 110, 152-56

Abstract: We critically review studies by Blanchard (B) and Rachel and Summers (RS). By the standard fiscal-gap measure, the US government is in dire fiscal shape thanks to constantly enlarging its postwar, take-as-you-go Ponzi scheme. Yet B and RS seemingly rationalize its expansion. Their arguments rest on the safe rate being very low. But almost all households face high safe rates—the rates available from pre-paying their loans. We also question modeling assumptions that help drive key B and RS results and reference recent simulation studies, which reach strongly opposite conclusions to B's.

JEL-codes: E43 E62 G21 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (1)

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DOI: 10.1257/pandp.20201104

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