This study finds that while present monetary and fiscal policy stances are likely to lead to robust growth and improved employment, this would come only at the expense of high government deficits, record foreign deficits, and rising ratios of government and foreign debt relative to GDP. Even...

The paper argues in favor of significant budget deficits based on the understanding that the expansion of the 1990s was fueled by a great build-up of debt, and that this would eventually give way to a severe recession unless offset by a strong fiscal stimulus. In 2001, with the total government...

As we projected in the previous strategic analysis paper, the U.S. economy experienced growth rates higher than 4 percent in 2004. The question we want to raise in this new strategic analysis paper is whether these rates will persist or come back down. We believe that several signs point in the...

Can the growth in the U.S. current account deficit be sustained? How does the flow of deficits feed the stock of debt? And how will the burden of servicing this debt affect future deficits and economic growth? These are some of the questions we address in this Strategic Analysis....

The main arguments in this paper can be simply stated: 1) If output in the US grows fast enough to keep unemployment constant between now and 2010 and if there is no further depreciation in the dollar, the deficit in the balance of trade is likely to get worse, perhaps reaching 7.5 per cent by...

Rising home prices and low interest rates have fueled the recent surge in mortgage borrowing and enabled consumers to spend at high rates relative to their income. Low interest rates have counterbalanced the growth in debt and acted to dampen the growth in household debt-service burdens. As past...

The collapse in the subprime mortgage market, along with multiple signals of distress in the broader housing market, has already drawn forth a large body of comment. Some people think the upheaval will turn out to be contagious, causing a major slowdown or even a recession later in 2007. Others...

The economic recovery plans currently under consideration by the United States and many other countries seem to be concentrated on the possibility of using expansionary fiscal and monetary policies alone. In a new Strategic Analysis, the Levy Institute's Macro-Modeling Team argues that, however...

These are fast moving times. Two years ago, the U.S. Congressional Budget Office (CBO, 2001) projected a federal budget surplus of $172 billion for fiscal year 2003. One year ago, the projected figure had changed to a deficit of $145 billion (CBO 2002). The actual figure, near the end of fiscal...

Wynne Godley, our Levy Institute colleague, has warned since 1999 that the falling personal saving and rising borrowing trends that had powered the US economic expansion were not sustainable. He also warned that when these trends were reversed, as has happened in other countries, the expansion...