Title page
Contents
Summary 2
Introduction 4
Fiscal Policy and Economic Theory 4
Benefits of Expansionary Fiscal Policy 5
Short-Term Risks of Expansionary Fiscal Policy 5
Rising Interest Rate Risk 5
Rising Inflation Risk 6
Risks of Persistent Expansionary Fiscal Policy 6
Long-Term Growth 7
Crowding Out Government Spending 7
Growing Deficits and Debt in the Current Macroeconomic Landscape 7
Recent Trends in Deficits and Publicly Held Debt 7
Current Economic Landscape 10
High Inflation 10
Rising Interest Rates 13
Stagnating Real GDP Growth 16
Policy Issues 17
Debt Sustainability 17
"Tipping Points" 18
Tradeoffs of Deficit Reduction 19
Author Information 21
Disclaimer 21
Figure 1. Federal Deficit as a Percent of GDP 9
Figure 2. Publicly Held Debt-to-GDP Ratio 10
Figure 3. The Phillips Curve 11
Figure 4. Real Interest Rates 12
Figure 5. Net Interest as a Percentage of GDP 15
Figure 6. Average Annual Real GDP Growth 16