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Budget Analysis and Deficit Financing 91: Application

This document discusses budget analysis and deficit financing. It covers topics like government budgeting, measuring budgetary positions, long-run perspectives on debts and deficits, and why the government's fiscal position matters. Sections explore issues such as the budget deficit in recent years, efforts to control the deficit, and how current labels on debts and deficits may be meaningless when taking a long-run view of government budgets. Alternative measures of long-run government fiscal positions and the relationship between budget deficits, interest rates, and economic growth are also examined.

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148 views1 page

Budget Analysis and Deficit Financing 91: Application

This document discusses budget analysis and deficit financing. It covers topics like government budgeting, measuring budgetary positions, long-run perspectives on debts and deficits, and why the government's fiscal position matters. Sections explore issues such as the budget deficit in recent years, efforts to control the deficit, and how current labels on debts and deficits may be meaningless when taking a long-run view of government budgets. Alternative measures of long-run government fiscal positions and the relationship between budget deficits, interest rates, and economic growth are also examined.

Uploaded by

penelopegerhard
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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3.4 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

85

Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

Questions and Problems . . . . . . . . . . . . . . . . . . . . . . . . . . 85

Advanced Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86

APPENDIX TO CHAPTER 3 Cross-Sectional Regression Analysis . . . . . 88

CHAPTER 4 Budget Analysis and Deficit Financing . . . . . . . . 91


4.1 Government Budgeting . . . . . . . . . . . . . . . . . . . . . . . . 93
The Budget Deficit in Recent Years 93
The Budget Process 94
Application: Efforts to Control the Deficit 95
Budget Policies and Deficits at the State Level 97

4.2 Measuring the Budgetary Position of the Government:


Alternative Approaches . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Real vs. Nominal 98
The Standardized Deficit 99
Cash vs. Capital Accounting 100
Static vs. Dynamic Scoring 102

4.3 Do Current Debts and Deficits Mean Anything?


A Long-Run Perspective . . . . . . . . . . . . . . . . . . . . . . . . . . 103
Background: Present Discounted Value 103
Why Current Labels May Be Meaningless 104
Alternative Measures of Long-Run Government Budgets 105
What Does the U.S. Government Do? 109
Application: The Financial Shenanigans of 2001 112

4.4 Why Do We Care About the Governments


Fiscal Position? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
Short-Run vs. Long-Run Effects of the Government on the Macroeconomy 113
Background: Savings and Economic Growth 114
The Federal Budget, Interest Rates, and Economic Growth 115
Intergenerational Equity 117

4.5 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118

Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119

Questions and Problems . . . . . . . . . . . . . . . . . . . . . . . . . . 119

Advanced Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120

ix

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