The Policy Debate: What Policies Will Reduce the Debt Burden & Promote Economic Growth

Left-leaning: Grow economy and improve fiscal sustainability with mix of private sector incentives, and government investments, selected tax increasesRight-leaning: Grow economy and improve fiscal sustainability through tax cuts, investment incentives, and slowing government spending

Comprehensive Plans to Address the National Debt ( Collection of studies from 7 think tanks across spectrum: American Action Forum, American Enterprise Inst., Bipartisan Policy Center, Center for American Progress, Economic Policy Inst., Manhattan Inst., Progressive Policy Inst.   Note: the above comprehensive plans are proposals, not studies addressing the assumptions  about which policies provide the biggest ‘bang for the buck’; e.g. economic growth assumed from tax cuts, selected reduced govt. spending vs economic growth from government investment, tax increases and the many combinations in between. The links to the 7 proposals are below:

American Action Forum June 2019:

Solutions Initiative 2019: American Action Forum (

Bipartisan Policy Center June 2019:

Solutions Initiative 2019: Bipartisan Policy Center (

American Enterprise Institute June 2019:

Solutions Initiative 2019: AEI (

Center for American Progress June 2019:

Solutions Initiative 2019: The Center for American Progress (

Economic Policy Institute June 2019:

Solutions Initiative 2019: Economic Policy Institute (

Manhattan Institute June 2019:

Solutions Initiative 2019: Manhattan Institute (

Progressive Policy Institute 2019:

Solutions Initiative 2019: Progressive Policy Institute (

A note about future article selection for Debt & Deficits:

I will exclude papers that claim that too much spending is the reason U.S. federal debt has grown over the decades. This notion violates the ‘Framing of Issue’ standard I have defined for this website. Deficits occur when tax receipts do not cover government spending. So, by definition it’s disingenuous to acknowledge only the government spending side of the deficit equation. An example from everyday life drives home the point: Mom & Dad let their adult kid move home, but they fail to collect enough money from the kid to cover expenses, then borrow in the kid’s name to cover expenses. Good stewards would stop saddling the kid and his descendants with debt and require the kid to actually pay for what he consumes today.

Select Papers : the two papers below have helped to encourage new thinking in this area….

Furman & Summers, A Reconsideration of Fiscal Policy in an Era of Low Interest Rates, November 2020: This paper argues that while the future is unknowable and the precise reasons for the decline in real interest rates are not entirely clear, declining real rates reflect structural changes in the economy that require changes in thinking about fiscal policy and macroeconomic policy more generally that are as profound as those that occurred in the wake of the inflation of the 1970s.

A Reconsideration of Fiscal Policy in Era of Low Interest Rates ( Nov 2020)

Olivier Blanchard, Public Debt & Low Interest Rates, February 2019:

Abstract: First, the current US situation in which safe interest rates are expected to remain below growth rates for a long time is more the historical norm than the exception. If the future is like the past, this implies that debt rollovers—that is, the issuance of debt without a subsequent increase in taxes—may well be feasible. Put bluntly, public debt may have no fiscal cost. Second, even without fiscal costs, public debt reduces capital accumulation and may therefore have welfare costs. However, welfare costs may be smaller than typically assumed. The reason is that the safe rate is the risk-adjusted rate of return on capital. A safe rate that is lower than the growth rate indicates that the risk-adjusted rate of return to capital is in fact low. The average risky rate, i.e. the average marginal product of capital, also plays a role, however. Blanchard shows how both the average risky rate and the average safe rate determine welfare outcomes. Third, while the measured rate of earnings has been and is still quite high, the evidence from asset markets suggests that the marginal product of capital may be lower, with the difference reflecting either mismeasurement of capital or rents. This matters for debt: The lower the marginal product, the lower the welfare cost of debt. Fourth, Blanchard discusses a number of arguments against high public debt, and in particular the existence of multiple equilibria where investors, believing debt to be risky, require a risk premium, which increases the fiscal burden and makes debt effectively more risky. This argument, while relevant, does not have straightforward implications for the appropriate level of debt. Some of these conclusions will be controversial. But the aim of the paper is to foster a richer discussion of the costs of debt and fiscal policy than is currently the case, not to argue for more public debt, especially in the current political

Working Paper 19-4: Public Debt and Low Interest Rates (

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