SUERF Policy Note - Can the US sustain a rising debt burden?*

This excludes holdings by the federal government of its own debt and is the metric on which the public debate and the economic profession usually focus. [...] www.suerf.org/policynotes SUERF Policy Note No 344 2 Can the US sustain a rising debt burden? Over time, one should expect a higher term premium in US debt markets than what has been experienced in the last ten to fifteen years, marking the end of the era of low borrowing costs for the US government. [...] Formally, the evolution of the debt level (D) is influenced by its initial value (close to 100% of GDP today for debt held by the public), the interest cost (r), and the difference between the debt’s interest rate and the economy’s growth rate (r – g). [...] www.suerf.org/policynotes SUERF Policy Note No 344 3 Can the US sustain a rising debt burden? “In the event of a rising debt trajectory triggering higher interest rates (creating a vicious cycle), the government would be compelled to run increasingly larger primary surpluses to keep the debt-to-GDP ratio stable.” The Long-Term Fiscal Dilemma for the US The non-partisan US Congressional Budget Offi. [...] Natacha Valla discussion and understanding of financial markets and institutions, the The views expressed are those of the monetary economy, the conduct of author(s) and not necessarily those of SUERF Secretariat regulation, supervision and monetary the institution(s) the author(s) is/are c/o OeNB policy.