Slowing economic growth and debt fatigue continue to hamper fiscal policy in the United States. The question is whether there is an alternative path to the one projected in CBO long term forecasts, and if so, how citizens can choose this alternative path. The experiences of Germany, Sweden, and Switzerland reveal that an alternative path of sustainable debt is possible, and that citizens in a democratic society are capable of choosing that path. This book explores the potential impact of Swiss-style fiscal rules on the U.S. budget and the economy over the next three decades. The dynamic simulation analysis reveals that with these fiscal rules in place, it is possible for the U.S. to stabilize and reduce debt to sustainable levels over the forecast period. The government must preserve policy credibility by demonstrating a commitment to meet the challenges of economic shocks. The recent economic crises have provided a learning experience, and the rules-based macroeconomic framework required for this new era may differ significantly from that of the past. With new fiscal rules in place, the U.S. can restore long term economic growth. However, empirical analysis reveals how difficult this challenge will be, and why the U.S. is likely to continue to experience debt fatigue.
Barry W. Poulson is emeritus professor of economics at the University of Colorado.
John Merrifield is head of the Institute for Objective Policy Assessment and was a member of the faculty at the University of Texas at San Antonio for 32 years.
Chapter 1. Debt Fatigue and Debt Sustainability in Historical Perspective
Chapter 2. Understanding the U.S. Debt Crisis
Chapter 3. Debt Fatigue in the U.S. as a Failure of Macroeconomic Policy
Chapter 4. The Zombies are Coming
Chapter 5. A Look Back at the New Era of Fiscal Rules
Chapter 6. 2nd Generation Fiscal Rules for the U.S.
Chapter 7. The Merrifield-Poulson Rules for Restoring a Great Moderation in Fiscal Policy
Chapter 8. Institutional Reforms to Restore a ‘Great Moderation’ in Monetary and Fiscal Policy: The Friedman Solution
Poulson and Merrifield illuminate the hidden, but exorbitant, social cost of current U.S fiscal policy and identify a sustainable, pro-growth, Federalist founders-inspired alternative. A must read for policy makers and staff.
Most American voters, and most American policy makers, recognize that the federal government’s deficit spending is generating unsustainable growth in the national debt, yet deficit spending continues unchecked. Barry Poulson and John Merrifield explain why deficit spending continues, and offer commonsense policy recommendations to bring deficit spending under control.
This is an excellent and timely book on the growing problem of U.S. government debt. Restoring Sustainable Macroeconomic Policies in the U.S. provides a wide-ranging and noteworthy discussion of the history of U.S. debt, the politics that drive it, and prospects for restraining it. Poulson and Merrifield make a compelling case for "rules-based" reform that constrains political dysfunction, while providing thoughtful and careful examples. A first-rate contribution.
Restoring Sustainable Macroeconomic Policies in the U.S. is a masterful indictment of the
United States’ delusions on deficits and debt. Poulson and Merrifield argue their case for fiscal sanity with such verve and lucidity that even politicians and journalists may follow with little difficulty and much profit.