Deficits and Debt in the Short and Long Run

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• Date : 2005-05-24
• Time : 15:00
• Speaker : Prof. Benjamin M. Friedman
• Venue : B棟110室
• Background : Prof. Benjamin M. Friedmani 為Ph.D. in Economics, Harvard University (1971)。 現為William Joseph Maier Professor of Political Economy，Harvard University。 他曾於1991-1994年間任Chairman, Dept. of Economcis, Harvard。其主要研究領域為貨幣政策。主編Handbook of Monetary Economics，並已發表百餘篇著作，其中有多篇著作刊登於Journal of Political Economy、American Economic Review及Quarterly Journal of Economics等重要期刊。
• Abstract : The return of large-scale fiscal irresponsibility to U.S. economic policymaking has brought back to center stage a set of questions that dominated the public discussion a decade and a half ago but then mostly faded from view during the course of the 1990s: To what extent do government budget deficits, maintained even when the economy’s resources are fully employed, raise real interest rates and impair the economy’s ability to undertake productive investment? To what extent do they force either the government or the private sector, or both, to borrow from abroad? What implications follow over longer periods of time, as persistent deficits accumulate into an ever larger stock of government debt outstanding and persistent borrowing from abroad accumulates into ever greater net foreign indebtedness for the nation as a whole? In the meanwhile, do deficits stimulate greater real economic activity if resources are not fully employed? Marx observed that history repeats itself, first as tragedy and then as farce. In the 1980s President Ronald Reagan’s fiscal program, combining tax cuts, increased military spending and unwillingness to cut large-dollar federal programs in the nonmilitary sphere, led to post-war record deficits and a doubling of government indebtedness compared to the national income. The consequences included record-high real interest rates, diminished net investment in new factories and machinery, and the transformation of America internationally from a net creditor country to a net debtor. Since 2001 President George W. Bush’s fiscal program, combining tax cuts, increased military spending and increases in nonmilitary programs like farm subsidies and prescription drug benefits for the retired elderly, has already led to sizeable (though not recordsize) budget deficits. Whether the economic phenomena that accompanied the deficits of the Reagan era will ensue this time as well is the central question under debate.