Bài giảng MicroEconomics - Chapter 030 Fiscal Policy, Deficits, and Debt

Fiscal Policy, Deficits, and DebtChapter 30McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.Chapter ObjectivesPurposes, tools, and limitations of fiscal policyBuilt-in stabilizers and the business cycleThe standardized budget and U.S. fiscal policyU.S. public debtFiscal PolicyCouncil of Economic Advisers (CEA)Discretionary fiscal policyEliminate recessionary or inflationary gapCountercyclical Nondiscretionary fiscal policyPassive or automaticExpansionary fiscal policyIncreased spending and/or lower taxesBudget deficitContractionary fiscal policyLower spending and/or higher taxesBudget surplusPolicy options?Fiscal PolicyExpansionary Fiscal PolicyReal Domestic Output, GDPPrice LevelAD2RecessionsDecreaseAggregateDemandAD1$5 Billion AdditionalSpending Full $20 Billion Increase inAggregate DemandAS$490$510P1Contractionary Fiscal PolicyReal Domestic Output, GDPPrice LevelAD3Reduce Demand PullInflationAD4$5 Billion Initial DecreaseIn Spending Full $20 Billion Decrease inAggregate DemandAS$510$522P1Built-In StabilityAutomatic stabilizersTaxes and transfersEconomic importanceTax progressivityProgressive tax systemProportional tax systemRegressive tax systemBuilt-In StabilityGTDeficitSurplusGDP1GDP2GDP3Real Domestic Output, GDPGovernment Expenses, Gand Tax Revenues, TEvaluating Fiscal PolicyStandardized budget Full-employment budgetCyclical deficitRecent U.S. fiscal policyBudget deficits and projectionsSocial security considerationsEvaluating Fiscal PolicyGTGDP2GDP1Real Domestic Output, GDPGovernment Expenses, Gand Tax Revenues, T(Year 2)(Year 1)$500$450abcCyclical deficitFiscal policy neutralEvaluating Fiscal PolicyGT1GDP4GDP3Real Domestic Output, GDPGovernment Expenses, Gand Tax Revenues, T(Year 4)(Year 3)$500$450def$475$425gT2hStandardized deficitExpansionary fiscal policy(1)Year(2)ActualDeficit (-) orSurplus (+)(3)StandardizedDeficit (-) orSurplus (+)Budget Balances as % of GDP1992199319941995199619971998199920002001200220032004200520062007-4.5%-3.8%-2.9%-2.2%-1.4%-0.3%+0.8%+1.4%+2.5%+1.3%-1.5%-3.4%-3.5%-2.6%-1.9%-1.3%-2.9%-2.9%-2.1%-2.0%-1.2%-1.0%-0.4%+0.1%+1.1%+1.0%-1.2%-2.5%-2.4%-1.9%-1.8%-1.4%Source: Congressional Budget OfficeStandardized Budget BalancePercentage of Potential GDP, 2007 Source: Organization for Economic Cooperation and DevelopmentDenmarkNew ZealandIrelandCanadaNorwayFranceUnited StatesUnited KingdomJapan-6-4-20246DeficitsSurplusesFederal Budget BalanceActual and Projected, Fiscal 1994-2014 Source: Congressional Budget Office$3002001000-100-200-300-400-500Budget Deficit (-) or Surplus, Billions19941996199820002002200420062008201020122014ActualProjected(as of March 2008)Problems of timingRecognition lagAdministrative lagOperational lagPolitical considerationsFuture policy reversalsOffsetting state and local financeCrowding-out effectCurrent thinking on fiscal policyProblems, Criticisms, and ComplicationsFiscal Policy IssuesThe Public DebtNational or public debt $9.01 trillionOwnershipU.S. securities53% owned by federal government and Federal Reserve47% held outside the federal government and Federal Reserve Debt Held by theFederal Governmentand FederalReserve (53%)Debt Held OutsideThe FederalGovernmentand FederalReserve (47%)FederalReserveU.S.GovernmentAgenciesU.S.IndividualsForeignOwnershipU.S. BanksAnd otherFinancialInstitutionsOther, IncludingState and LocalGovernmentsSource: U.S. Treasury9%7%25%8%7%44%The Public DebtTotal Debt: $9.01 trillionDebt and GDPFederal debt held by the public, percentage of GDP Source: Economic Report of the President, 2006Percent of GDPYear5045403530252015105019701975198019851990199520002005Debt and GDPPublicly Held Debt: International ComparisonsAs a Percentage of GDP, 2007ItalyJapanBelgiumHungaryGermanyUnited StatesUnited KingdomFranceNetherlandsCanadaSpainPoland0 20 40 60 80 100 Source: Organization for Economic Cooperation and DevelopmentDebt and GDPInterest chargesPrimary burden1.7% of GDP 2007False concernsBankruptcyRefinancingTaxationBurdening future generationsDebt and GDPSubstantive issuesIncome distributionIncentivesForeign-owned public debtCrowding-out effect revisitedBurden on future generationsPublic investment as an offsetGraphically Crowding Out5101520253035400246810121416Real Interest Rate (Percent)Investment (Billions of Dollars)ID1ID2abcInterest RateRise WillDecreaseInvestmenta to bCrowding-Out EffectA Large Public Debt to Finance Public Investment Will CauseIf Public SpendingSpurs More PrivateInvestment WillIncrease to ID2The Leading IndicatorsAverage workweekInitial claims for unemployment insuranceNew orders for consumer goodsVendor performanceNew orders for capital goodsBuilding permits for housesStock pricesMoney supplyInterest-rate spreadConsumer expectationsSource: The Conference BoardKey Termsfiscal policyCouncil of Economic Advisers (CEA)expansionary fiscal policybudget deficitcontractionary fiscal policybudget surplusbuilt-in stabilizerprogressive tax systemproportional tax systemregressive tax systemstandardized budgetcyclical deficitpolitical business cyclecrowding-out effectpublic debtU.S. securitiesexternal public debtpublic investmentsNext Chapter PreviewMoney andBanking