140 likes | 300 Views
CHAPTER 20. DEFICIT FINANCE. How Big is the Deficit?. Deficit Surplus On-budget deficit Off-budget deficit. How Big is the Deficit?. How Big is the Debt? . National (Public) Debt Stocks v Flows. How Big is the Debt?. Interpreting Deficit, Surplus, and Debt Numbers.
E N D
CHAPTER 20 DEFICIT FINANCE
How Big is the Deficit? • Deficit • Surplus • On-budget deficit • Off-budget deficit
How Big is the Debt? • National (Public) Debt • Stocks v Flows
Interpreting Deficit, Surplus, and Debt Numbers • Government Debt held by the Federal Reserve Bank • State and Local Government • Effects of Inflation • inflation tax • Capital versus Current Accounting • Tangible Assets • Implicit Obligations • Summing Up
The Burden of the Debt • Statutory versus Economic Incidence • Lerner’s View • Internal Debt • External Debt
Generational Accounting • Computation of Net Tax • PV of transfers received – PV of taxes paid
Neoclassical Model • Crowding Out Hypothesis • Empirical testing of the hypothesis
The Ricardian Model • Intergenerational transfers • Form of Finance is irrelevant • Empirical evidence
To Tax or to Borrow • Benefits-Received Principle • Intergenerational Equity • Efficiency Considerations • χ = ½εLt2 • Macroeconomic Considerations • Functional finance • Moral and Political Considerations
Present Value of Tax Payments Under Alternative Taxing/Borrowing Decisions
To Tax or To Borrow ExcessBurden χ2 χ1 t 2t Tax rate