Leveraging Posterity's Prosperity?

摘要

Our paper examines two thought-provoking papers—Blanchard (2019) (B) and Rachel and Summers (2019) (RS)—that rationalize, without outright endorsing, additional US deficit spending. B suggests that since US growth rates routinely exceed safe interest rates, "public debt may have no fiscal cost."1 RS seeks to mitigate what it views as secular stagnation by using government borrowing to keep the safe rate above the so-called zero lower bound. Given limited space, we specialize in criticism. Our paper starts by pointing out that the government's intertemporal budget constraint (IBC) limits additional deficit finance even were it advantageous at the margin, not least because of America's initial condition—a massive fiscal gap. Next, we discuss results on efficiency in overlapping generation (OLG) models that circumscribe B's conjecture.