scholarly journals Federal Budget Policy with an Aging Population and Persistently Low Interest Rates

2017 ◽  
Vol 31 (3) ◽  
pp. 175-194 ◽  
Author(s):  
Douglas W. Elmendorf ◽  
Louise M. Sheiner
Keyword(s):  
Interest Rates ◽  
Federal Budget ◽  
Federal Spending ◽  
Budget Deficits ◽  
The Us ◽  
Us Government ◽  
Low Interest Rates ◽  
Budget Policy ◽  
Federal Debt ◽  
The Government

Some observers have argued that the projections for high and rising debt pose a grave threat to the country's economic future and give the government has less fiscal space to respond to recessions or other unexpected developments, so they urge significant changes in tax or spending policies to reduce federal borrowing. In stark contrast, others have noted that interest rates on long-term federal debt are extremely low and have argued that such persistently low interest rates justify additional federal borrowing and investment, at least for the short and medium term. We analyze this controversy focusing on two main issues: the aging of the US population and interest rates on US government debt. It is generally understood that these factors play an important role in the projected path of the US debt-to-GDP ratio. What is less recognized is that these changes also have implications for the appropriate level of US debt. We argue that many—though not all— of the factors that may be contributing to the historically low level of interest rates imply that both federal debt and federal investment should be substantially larger than they would be otherwise. In conclusion, although significant policy changes to reduce federal budget deficits ultimately will be needed, they do not have to be implemented right away. Instead, the focus of federal budget policy over the coming decade should be to increase federal investment while enacting changes in federal spending and taxes that will reduce deficits gradually over time.

BUDGET DEFICITS AND INTEREST RATES: THE US EVIDENCE SINCE 1946

2007 ◽  
Vol 52 (02) ◽  
pp. 191-200
Author(s):  
SHAKIL QUAYES ◽  
A. M. M. JAMAL
Keyword(s):  
Interest Rates ◽  
Corporate Bonds ◽  
Federal Budget ◽  
Private Investment ◽  
Budget Deficits ◽  
Real Rate ◽  
The Us ◽  
Potential Impact ◽  
Post War

Many economists believe that federal government's budget deficits result in higher interest rates. This increase in interest rates can stifle private investment and impede the real rate of economic growth for the economy. This paper examines the potential impact of federal budget deficits on long-term interest rates for corporate bonds. The study is based on post-war annual US data, and employs a standard demand-supply model. The empirical results in our study provide evidence that the increasing budget deficits lead to higher interest rate for corporate bonds. In this regard, our study supports arguments for the crowding out theory.

scholarly journals The Case for a New Fiscal Constitution

1992 ◽  
Vol 6 (2) ◽  
pp. 13-24 ◽  
Author(s):  
William A Niskanen
Keyword(s):  
Price Level ◽  
Federal Budget ◽  
Fiscal Rules ◽  
Budget Deficits ◽  
Voting Rules ◽  
The Public ◽  
General Price Level ◽  
Federal Debt ◽  
Fiscal Constitution ◽  
The Government

For the first 140 years of U.S. history, the federal budget was effectively constrained by two fiscal rules: the formal limits within the Constitution on the enumerated spending powers and an informal rule that the government could borrow only during recessions and wars. At the end of the 1920s, federal expenditures were 2.6 percent of GNP. The federal debt was constrained to about equal to 16 percent of GNP. The general price level was roughly stable over this long period. Over the past six decades, however, federal expenditures have increased to nearly 25 percent of GNP. Larger and more frequent budget deficits have increased the federal debt held by the public to an amount equal to about 50 percent of GNP. And the general price level is now about nine times the level at the beginning of this period. This dramatic change in fiscal and monetary conditions occurred without one amendment to the Constitution to authorize a change in the fiscal rules. Our effective fiscal constitution has been transformed into one in which Congress and the President may authorize any type or amount of expenditures and taxes, subject only to the voting rules for routine legislation. How did this happen? Should economists be concerned about this change in the fiscal constitution? What, if anything, should be done about it?

Interpreting the Reagan Deficits

2017 ◽  
Author(s):  
Thomas J. Sargent
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Reagan Administration ◽  
Federal Budget ◽  
Ronald Reagan ◽  
Government Budget ◽  
Government Deficits ◽  
Tax Smoothing ◽  
The Government ◽  
Monetary And Fiscal Policy

This chapter examines the large net-of-interest deficits in the U.S. federal budget that have marked the administration of Ronald Reagan. It explains the fiscal and monetary actions observed during the Reagan administration as reflecting the optimal decisions of government policymakers. The discussion is based on an equation whose validity is granted by all competing theories of macroeconomics: the intertemporal government budget constraint. The chapter first considers the government budget balance and the optimal tax smoothing model of Robert Barro before analyzing monetary and fiscal policy during the Reagan years: a string of large annual net-of-interest government deficits accompanied by a monetary policy stance that has been tight, especially before February 1985, and even more so before August 1982. Indicators of tight monetary policy are high real interest rates on government debt and pretax yields that exceed the rate of economic growth.

Public Heritage Communication on American Indian Wars Sites: Policy Improvement and Remaining Challenges

2017 ◽  
Vol 2 (2) ◽  
pp. 152-168
Author(s):  
Hyojung Cho ◽  
Ernest Gendron
Keyword(s):  
American Indian ◽  
American Indians ◽  
Military History ◽  
Policy Improvement ◽  
Indian Wars ◽  
Heritage Sites ◽  
The Us ◽  
Us Government ◽  
History Of ◽  
The Government

Federal historic preservation is an important way to provide public recognition and to promote heritage that was selected by the government for the nation. The history of (American) Indian policies shows an arduous relationship between the US government and American Indians. In spite of the evolution of federal preservation efforts and the federal government’s public heritage communication, Indian heritage sites still reflect the authoritarian and utilitarian understanding towards the Indian heritage. This research studies the US federal government’s understanding of Indian Wars sites through the analysis of interpretation at the Washita Battlefield National Historic Site, which reveals the historically dual approaches towards Indian heritage conservation and the persistent tendency of limited under-standing for American history in the larger social and political arenas despite policy improvement. American Indian battlefields have been neglected in orthodox preservation considering their insufficient value to qualify for patriotic military history preservation or Indian relics preservation. The analysis of preservation efforts and interpretation of Indian Wars sites indicates the evolution of controlling (American) Indian heritage through policy changes and the assessment of policy implementation.

Strategies for Business Firms in Declining Markets

2009 ◽  
Vol 5 (2) ◽  
pp. 173-181
Author(s):  
Sarira Aurangabadkar
Keyword(s):  
Interest Rates ◽  
Developed Countries ◽  
Fiscal Year ◽  
Government Growth ◽  
Global Recession ◽  
Reserve Bank ◽  
The Us ◽  
Manufacturing Activity ◽  
The Government ◽  
The Uk

The economic crisis that has engulfed the world since 2007 has become serious by the first quarter of 2009.Many developed countries too are affected severely, namely the US, Germany, the UK and others. Fortunately, India as of now seems to be less affected, yet the winds of global recession are now felt. The Indian economy grew at an annual rate of 7.6% in the quarter ending in September, 2008. As per the projections of the government growth in the fiscal year, 2008-09 could be in the range of 7 to 8 %, which is, lower than 9% in the last year. The government has unveiled a multibillion dollar stimulus on 7th December, 2008 and 2nd January, 2009 respectively. The Reserve Bank of India has cut interest rates aggressively. India Inc has felt the heat of the global meltdown in the third quarter ending in December, 2008 where the income has dropped by a massive 23% points compared to the previous year. Indian manufacturing activity has contracted for the second consecutive month in December, 2008 to its lowest in more than three and half years. India’s exports too have declined by 12.1 % in October, 2008 showing a negative trend for the first time in the last five years.

US energy high-yield bonds spur default risk

2015 ◽  
Keyword(s):  
Interest Rates ◽  
Default Risk ◽  
Oil Price ◽  
High Yield ◽  
Content Type ◽  
The Past ◽  
The Us ◽  
Low Interest Rates ◽  
Investment Grade ◽  
Energy Companies

Subject Impact of the oil price drop on energy high-yield bonds. Significance The over 50% oil price drop since June 2014 is hitting bonds issued by energy companies, particularly those issued by sub-investment grade corporates. The US high-yield bond market has been growing rapidly over the past five years. The shale boom has generated considerable investment, mainly funded through the issuance of these bonds which benefit from historically low interest rates. As the oil price has plunged, the spread over Treasury yields paid by the average issuer in the energy subsector has more than doubled between July and the December 2014 peak. Impacts Yields currently offered by the energy subsector are not far from pricing in a default scenario. Persistently low oil prices will further darken the outlook for the energy subsector and the high-yield market generally. A possible default cycle in the energy sector could accelerate outflows, overstretching the sector further.

scholarly journals THE INFLUENCE OF GDP, INTEREST RATE, WAGE, INFLATION AND EXCHANGE RATE ON RESIDENTIAL PROPERTY PRICE IN INDONESIA

2019 ◽  
Vol 17 (9) ◽  
Author(s):  
Badrud Duja ◽  
Heri Supriyanto
Keyword(s):  
Economic Growth ◽  
Exchange Rate ◽  
Interest Rate ◽  
Interest Rates ◽  
Residential Property ◽  
Property Prices ◽  
The Us ◽  
Property Price ◽  
Us Dollar ◽  
The Government

Over the past years, Indonesia’s economic growth has been recorded among the top developing countries. The economic growth is believed to contribute to the increase on residential property prices. The main objective of this study is to analyse the influence of determinants of residential property prices in Indonesia by examining the dynamic relationships of residential property prices reflected through the Residential Property Price Index (RPPI) with Gross Domestic Product (GDP), investment interest rates, wages, inflation and the exchange rate against the US dollar using secondary data over a period of thirteen-years between 2002Q1 and 2014Q4. By applying the Engle-Granger co-integration testand the error correction model, this research aims to see the relationship between the variables both in the short- and long-term. The results of the study indicated that macroeconomic factors that were significantly related to Indonesian residential property prices were GDP, wages, inflation, and exchange rates against the US dollar, while the investment interest rate was not included in these factors. Furthermore, based on the results of the regression analysis on research data, government policy in setting minimum wage standards has the greatest impact on residential property prices in the property sector in Indonesia. Thus, the results of this research are expected to provide the government with better viewpoints that will assist them in enacting better policies in the residential property sector.

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