òòò½Íø Papers and Proceedings
ISSN 2574-0768 (Print) | ISSN 2574-0776 (Online)
Leveraging Posterity's Prosperity?
òòò½Íø Papers and Proceedings
vol. 110,
May 2020
(pp. 152–56)
Abstract
We critically review studies by Blanchard (B) and Rachel and Summers (RS). By the standard fiscal-gap measure, the US government is in dire fiscal shape thanks to constantly enlarging its postwar, take-as-you-go Ponzi scheme. Yet B and RS seemingly rationalize its expansion. Their arguments rest on the safe rate being very low. But almost all households face high safe rates—the rates available from pre-paying their loans. We also question modeling assumptions that help drive key B and RS results and reference recent simulation studies, which reach strongly opposite conclusions to B's.Citation
Brumm, Johannes, Laurence Kotlikoff, and Felix Kubler. 2020. "Leveraging Posterity's Prosperity?" òòò½Íø Papers and Proceedings 110: 152–56. DOI: 10.1257/pandp.20201104Additional Materials
JEL Classification
- E43 Interest Rates: Determination, Term Structure, and Effects
- E62 Fiscal Policy
- G21 Banks; Depository Institutions; Micro Finance Institutions; Mortgages