econ305_15_Nov25

econ305_15_Nov25 - slide 1 Government Debt the size of the...

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Unformatted text preview: slide 1 Government Debt the size of the governments debt, comparisons across countries problems measuring the budget deficit the traditional and Ricardian views of the government debt other perspectives on the debt Indebtedness of the worlds governments Indebtedness of the worlds governments Country Gov Debt (% of GDP) Country Gov Debt (% of GDP) Japan 159 U.S.A. 64 Italy 125 Sweden 62 Greece 108 Finland 53 Belgium 99 Norway 52 France 77 Denmark 50 Portugal 77 Spain 49 Germany 70 U.K. 47 Austria 69 Ireland 30 Canada 69 Korea 20 Netherlands 64 Australia 15 slide 3 Ratio of U.S. govt debt to GDP 0.2 0.4 0.6 0.8 1 1.2 1791 1815 1839 1863 1887 1911 1935 1959 1983 2007 Revolutionary War Civil War WW1 WW2 Iraq War slide 4 The U.S. experience in recent years Early 1980s through early 1990s debt-GDP ratio: 25.5% in 1980, 48.9% in 1993 due to Reagan tax cuts, increases in defense spending & entitlements Early 1990s through 2000 $290b deficit in 1992, $236b surplus in 2000 debt-GDP ratio fell to 32.5% in 2000 due to rapid growth, stock market boom, tax hikes Since 2001 the return of huge deficits, due to Bush tax cuts, 2001 recession, Iraq war slide 5 The troubles for fiscal outlook The population is aging. Health care costs are rising. Spending on entitlements is growing. Deficits and the debt are likely to stay around slide 6 Percent of U.S. population age 65+ Percent of pop. 5 8 11 14 17 20 23 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 actual projected slide 7 U.S. government spending on Medicare and Social Security Percent of GDP 2 4 6 8 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 slide 8 projected U.S. federal government debt in two scenarios Percent of GDP 50 100 150 200 250 300 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 optimistic scenario pessimisti c scenario slide 9 Problems measuring the deficit 1. Inflation 2. Capital assets 3. Uncounted liabilities 4. The business cycle slide 10 MEASUREMENT PROBLEM 1: Inflation Suppose the real debt is constant, which implies a zero real deficit....
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This note was uploaded on 03/25/2010 for the course ECON 305 taught by Professor Vasyl(basil)golovetskyy during the Spring '09 term at Simon Fraser.

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econ305_15_Nov25 - slide 1 Government Debt the size of the...

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