2025/11/05 by Wendy Edelberg, Benjamin H. Harris, Louise Sheiner
Economics, Econometrics and Finance · #Fiscal Policies and Political Economy #Global Financial Crisis and Policies #European Monetary and Fiscal Policies
paper · doi:10.1086/738321
We examine how rising debt affects the economy and assess the risk of a fiscal crisis. The most likely consequence of rising debt is a gradual erosion of capital accumulation and national wealth, ultimately lowering living standards. We consider four potential scenarios that could lead to a crisis and argue that, even with projected increases in federal borrowing, a fiscal crisis is avoidable. If one does occur, it will likely stem from political missteps rather than the debt itself.