TY  - BOOK
AU  - Brumm,Johannes
AU  - Feng,Xiangyu
AU  - Kotlikoff,Laurence J.
AU  - Kubler,Felix
ED  - National Bureau of Economic Research.
TI  - Deficit Follies
T2  - NBER working paper series
PY  - 2021///
CY  - Cambridge, Mass.
PB  - National Bureau of Economic Research
N1  - June 2021; Hardcopy version available to institutional subscribers
N2  - Deficit finance is free when the growth rate routinely exceeds the government's borrowing rate. Or so many people say. This note presents three counterexamples. Each features a simple OLG economy with a zero growth rate and a negative government borrowing rate. None provides a basis for taking from the young and giving to the old. One example features idiosyncratic risk, one features policy uncertainty, and one features a safe borrowing rate that exceeds the safe lending rate. Progressive taxation cures the first problem. Policy resolution cures the second. And improved intermediation, perhaps organized by the government, cures the third. The three models are parables. Each conveys an inconvenient truth. Seemingly free deficits may, on careful inspection, be far more costly than they appear. Indeed, government intergenerational redistribution can lower the government borrowing rate, encouraging yet more inefficient deficit finance
UR  - https://www.nber.org/papers/w28952
UR  - http://dx.doi.org/10.3386/w28952
ER  -