TY  - JOUR
AU  - Friedman,Benjamin M.
TI  - Managing the U.S. Government Deficit in the 1980s
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 1209
PY  - 1985
Y2  - May 1985
UR  - http://www.nber.org/papers/w1209
L1  - http://www.nber.org/papers/w1209.pdf
N1  - Author contact info:
Benjamin M. Friedman
Department of Economics
Littauer Center 127
Harvard University
Cambridge, MA  02138
Tel: 617/495-4246
Fax: 617/495-7730
E-Mail: bfriedman@harvard.edu
AB  - In the absence of major policy changes, federal government budget deficits will probably constitute a serious impediment to any increase inthe U.S. economy's net investment rate, and may even depress the investment rate still further, during the latter 1980s. The U.S. Government's outstanding debt is now rising sharply in relation to gross national product,and, under either current legislation or the budget policies proposed by the Reagan Administration, it will continue to do so. This sustained upward movement of the government debt ratio will be unprecedented in U.S. peacetime experience. Because government debt and private-sector debt have historically moved inversely in relation to gross national production the United States, a rising government debt ratio over time implies a sustained contraction of private debt relative to the economy's size. This reduction in the private sector's relative debt position in turn implies a constriction of its ability to finance investment in net new capital formation.
ER  -