CHAP16Government Debt and Budget Deficits教程文件.pptVIP

* CHAPTER 16 Government Debt and Budget Deficits CASE STUDY: Accounting for TARP Should the TARP outlays count toward the deficit? The U.S. Treasury considered TARP outlays to be expenditures that increased the deficit, and will consider bank repayments as revenues that will reduce the deficit. Congressional Budget Office (CBO) counted the net present value of the program – outlays minus eventual repayments – adjusted for the risk of non-repayment. This works out to 25 cents for each dollar spent on TARP. * CHAPTER 16 Government Debt and Budget Deficits MEASUREMENT PROBLEM 4: The business cycle The deficit varies over the business cycle due to automatic stabilizers (unemployment insurance, the income tax system). These are not measurement errors, but do make it harder to judge fiscal policy stance. E.g., is an observed increase in deficit due to a downturn or an expansionary shift in fiscal policy? * CHAPTER 16 Government Debt and Budget Deficits MEASUREMENT PROBLEM 4: The business cycle Solution: cyclically adjusted budget deficit (aka “full-employment deficit”) – based on estimates of what government spending revenues would be if economy were at the natural rates of output unemployment. The actual and cyclically adjusted U.S. Federal budget surpluses/deficits actual cyclically-adjusted The actual and cyclically adjusted U.S. Federal budget surpluses/deficits Source: Congressional Budget Office * CHAPTER 16 Government Debt and Budget Deficits The bottom line We must exercise care when interpreting the reported deficit figures. * CHAPTER 16 Government Debt and Budget Deficits Is the government debt really a problem? Consider a tax cut with corresponding increase in the government debt. Two viewpoints: 1. Traditional view 2. Ricardian view * CHAPTER 16 Government Debt and Budget Deficits The traditional view Short run: ↑Y, ↓u Long run: Y and u back at their natural rates closed economy: ↑r, ↓I open economy: ↑ε, ↓NX