Chap020.ppt

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1、CHAPTER20DeficitFinanceCopyright©2010bytheMcGraw-HillCompanies,Inc.Allrightsreserved.McGraw-Hill/IrwinHowBigIstheDeficit?DeficitSurplusOn-budgetdeficitOff-budgetdeficitHowBigIstheDeficit?Source:CongressionalBudgetOffice[2009a]HowBigIstheDebt?National(Public)DebtS

2、tocksvs.FlowsHowBigIstheDebt?Source:CongressionalBudgetOffice[2009a]InterpretingDeficit,Surplus,andDebtNumbersGovernmentDebtheldbytheFederalReserveBankStateandLocalGovernmentEffectsofInflationInflationtaxCapitalversusCurrentAccountingTangibleAssetsImplicitObligat

3、ionsSummingUpTheBurdenoftheDebtStatutoryversusEconomicIncidenceLerner’sViewInternalDebtExternalDebtOverlappingGenerationsModelThePeriod2010-2030YoungMiddle-AgedOld(1)Income$12,000$12,00012,000(2)GovernmentBorrowing-6,000-6,000(3)Government-providedconsumption4,00

4、04,0004,000TheYear2030YoungMiddle-AgedOld(4)Governmentraisestaxestopaybackdebt-4,000-4,000-4,000(5)Governmentpaysbackdebt+6,000+6,000GenerationalAccountingComputationofNetTaxPVoftransfersreceived–PVoftaxespaidNeoclassicalModelCrowdingOutHypothesisEmpiricaltesting

5、ofthehypothesisTheRicardianModelIntergenerationaltransfersFormofFinanceisirrelevantEmpiricalevidenceToTaxorToBorrowBenefits-ReceivedPrincipleIntergenerationalEquityEfficiencyConsiderationsχ=½εLt2MacroeconomicConsiderationsFunctionalfinanceMoralandPoliticalConside

6、rationsPresentValueofTaxPaymentsUnderAlternativeTaxing/BorrowingDecisionsPolicyYear1Year2AllFutureYearsPV@10%interestrateSpendanadditional$100inyear110000100FinancingOptionsBalancedbudget:raise100intaxesinyear110000100DeficitFinanceI:borrow100inyear1andpaybackdeb

7、tplusinterestinyear2byraisingtaxes01100100DeficitFinanceII:borrow100inyear1andpayinterestondebtinallsubsequentyearsalwaysrollingoverdebtprinciple01010100ToTaxorToBorrowTaxrateExcessBurdent2tχ2χ1