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GDP Growth and the US Debt Sustainability

Walid Alali and Haider Ellalee ()

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Abstract: After the US dollar replaced gold, the US debt became the attention worldwide, thus the demand for the US dollar continued, furthermore the extremely low interest of the dollar. This helped the US government to borrow great amounts of debt as well as kept the creditors pleased. Due to the pandemic, the US economy retrograded because of the tax cut and unproductive rescue spending plan plus surpassing spending of the government. The acceleration of inflation looms, whereas the recession is begging to appear; and certainly, the government must cut back on spending or its patterns, while this will lead to uncertain consequences for the long future. Whereas increasing the interest rate will be not the right solution for the long term, on the contrary, will lead to dire economic consequences. This paper discusses several different perspectives on the US government's sustainability as its ability to settle the debt in future, the fate of growth burdened with that debt through the neoclassical mode of growth, and also the effect of anxiety of defaults and unfunded obligations. Inversely, it explores the strength of the dollar with a low-interest rate and its sustainability worldwide. We also propose ways helping of strengthen the fiscal government position and solutions to help the economy recover in long term and to easiest the situation. In the synopsis, we propose something that could affect and shake the global market.

Keywords: Neoclassical Growth Model; Debt; Debt-To-GDP; Inflation; Real Interest-Rates; Consumer Credit; Productivity E23; E40; F11; H63 (search for similar items in EconPapers)
Date: 2022-10-11
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Working Paper: GDP Growth and the US Debt Sustainability (2021)
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