The Economic Consequences of Rising U.S. Government Debt: Privileges at Risk

Henning Bohn

University of California at Santa Barbara, Economics Working Paper Series from Department of Economics, UC Santa Barbara

Abstract: The rapidly growing federal government debt has become a concern for policy makers and the public. Yet the U.S. government has seemingly unbounded access to credit at low interest rates. Historically, Treasury yields have been below the growth rate of the economy. The paper examines the ramifications of debt financing at low interest rates. Given the short maturity of U.S. public debt – over $2.5 trillion maturing in 2010 – investor expectations are critical. Excessive debts justify reasonable doubts about solvency and monetary stability and thus undermine a financing strategy built on the perception that U.S. debt is safe.

Keywords: government debt; budget deficits; Social and Behavioral Sciences (search for similar items in EconPapers)
Date: 2010-04-01
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: The Economic Consequences of Rising U.S. Government Debt: Privileges at Risk (2011)
Working Paper: The Economic Consequences of Rising U.S. Government Debt: Privileges at Risk (2010)
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