公共政策经济分析Chap18 Deficit Finance.ppt

Chapter 18 – Deficit Finance Introduction Besides taxation, the government’s other major revenue source is borrowing. In this lesson, we will: Discuss problems with measuring size of debt Who bears the burden of the debt When is borrowing a suitable way to finance government expenditure How Big is the Debt? Definitions: The deficit during a time period is the excess of spending over revenues The surplus during a time period is the excess of revenues over spending Some items are off-budget, like the revenues and expenditures associated with Social Security. How Big is the Debt? Thus, one could modify the terms to: On-budget deficit (surplus) Off-budget deficit (surplus) In 2002, the on-budget deficit was $317.5 billion, while the off-budget surplus was $159.6 billion. This gives a total deficit of $157.8 billion. How Big is the Debt? Table 18.1 shows the total federal budget deficits (including off-budget items) for a number of years Both in absolute size Relative to GDP Table 18.1 How Big is the Debt? Deficits have generally been the rule (although there was a surplus from 1998 to 2001). Deficit (as fraction of GDP) was highest in mid-1980s. How Big is the Debt? The debt at a given time is the sum of all past budget deficits. Cumulative excess of past spending over past receipts. When there is a deficit, debt goes up; when there is a surplus, debt goes down. Debt is stock variable, while deficit and surplus are flow variables How Big is the Debt? Federal debt at end of 2002 was: How Big is the Debt? Putting the debt in perspective The $3.5 trillion debt was about 34% of GDP in 2002 It has always been a large share of current GDP See Table 18.2 Servicing the debt comprised 8.5% of federal outlays in 2002. Table 18.2 Interpreting the Numbers The numbers above are clearly politically important. A key problem is that the numbers above are probably not economically meaningful. Interpreting the Numbers Government Debt Held by the Federal Reserve Bank FRB held $604 billio