“Financing U.S. Debt”

Guest Contribution: “Financing U.S. Debt”

In a Guest Contribution today, John Kitchen (U.S. Treasury, formerly Chief Economist, Office of Management and Budget) addresses the issue of “Financing U.S. Debt: Is There Enough Money in the World -- and at What Cost?”. The comments are based on a paper recently published in International Finance (Winter 2011), co-authored with Menzie Chinn. The views expressed are the author's and do not represent the views of the U.S. Treasury.

Ultimately, measures that reduce the deficit by changing the trajectory of tax revenues and spending, particularly in the latter years of the horizon we consider and beyond, would mitigate concerns about the financing of the U.S. budget and current account deficits. In the absence of such actions, it is unlikely that the rest of the world would finance our needs at the terms that are currently being projected, and American policymakers will become less and less the masters of our own economic fortunes.