The Evolution of Deficits in the United States and Implications for Debt Sustainability

2026/07/24 by Jesse Bricker, William Peterman, Rebecca Wasyk
Economics, Econometrics and Finance · #Debt #Fiscal Policies and Political Economy #Fiscal sustainability #Global Financial Regulation and Crises #Government debt #Sustainability #Sustainable Finance and Green Bonds #Western hemisphere

paper · doi:10.1086/742262

published in National Tax Journal, 000 (University of Chicago Press)

openalex publication_date 2026/07/24 · openalex created_date 2026/07/25 · openalex updated_date 2026/07/26

Abstract

The debt-to-GDP ratio is projected to continue to rise due to the primary deficit. This paper models the data generation process for the primary balance by incorporating a rich structure of serial correlation in the innovations to this process by its source (legislative, economic, and technical). We apply this model to debt accumulation, demonstrating that a richer structure for serial correlation leads to wider distributions of debt outcomes with significantly more debt accumulation. Onetime legislative consolidation is less effective at stabilizing the debt ratio than a series of smaller but correlated legislative innovations that are consistent with those in the pre-2000 period.

Citations

• On the Performance and Use of Government Revenue Forecasts
• The Macroeconomic Effects of Tax Changes: Estimates Based on a New Measure of Fiscal Shocks

Related

• The permanent effects of fiscal consolidations
• Do Governments React to Public Debt Accumulation? A Cross-Country Analysis
• A Positive Theory of Fiscal Deficits and Government Debt
• Characterizing Public Debt Cycles: Don't Ignore the Impact of Financial Cycles
• A note on the policy implications of the fiscal multiplier