布兰查德 宏观经济学 第四版 第26章.pptVIP

The GovernmentBudget Constraint Suppose that, starting from a balanced budget, the government cuts taxes, creating a budget deficit. What will happen to debt over time? Will the government need to increase taxes later? If so, by how much? The Arithmetic of Deficits and Debt The budget deficit in year t equals: The Arithmetic of Deficits and Debt Note two characteristics of We measure interest payments as real interest payments rather than as actual interest payments. The correct measure of the deficit is sometimes called the inflation-adjusted deficit. G does not include transfer payments. The Arithmetic of Deficits and Debt The Arithmetic of Deficits and Debt Or: Official and Inflation-Adjusted Budget Deficits for the United States, 1968-2004 Current Versus Future Taxes Let’s look at the implications of a 1-year decrease in taxes for the path of debt and future taxes. We start with a balanced budget, and end the year with the government decreasing taxes by 1 for 1 year. What happens thereafter? Full Repayment in Year 2 Full Repayment in Year 2 Full Repayment in Year 2 Full Repayment in Year 2 Full Repayment in Year t Debt at the end of year t?1 is given by: Full Repayment in Year t Our first set of conclusions: If government spending is unchanged, a decrease in taxes must eventually be offset by an increase in taxes in the future. The longer the government waits to increase taxes, or the higher the real interest rate, the higher the eventual increase in taxes. Debt Stabilization in Year t From , the budget constraint for year 2 is Under our assumption that debt is stabilized in Year . Replacing in the preceding equation: Reorganizing and bringing to the left side: Debt Stabilization in Year t From the preceding arithmetic of deficits and debt we can draw these conclusions: If government spending is unchanged, a decrease in taxes must eventually be offset by an increase in taxes