Federal Government Debt and Interest Rates

A defining feature of (at least) the last three general elections has been the emphasis placed on each political party's fiscal credibility and their ability to deliver “sound public finances”. Applying the logic of household book-keeping, balancing the fiscal budget is said to capture such soundness. There is, however, little evidence that a balanced budget is necessarily sound. Instead, the evolution of public finances depends on (1) both the fiscal choices made on the level of spending and taxation, (2) the underlying growth of the economy which depends on far more than the fiscal decisions, and (3) interest rates on government debt and the financing needs of the government. As the economic situation changes, so too does the likely path of debt to GDP and hence the possible fiscal options open to a country. Sticking to the soundbite of “sound finances” has often distracted from the underlying menu of political choices and as such is a disruptive narrative in UK economics today.

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Federal government debt and economic growth: Evidence from Malaysia

Progress in Development Studies ◽

10.1177/1464993415578980 ◽

2015 ◽

Vol 15 (3) ◽

pp. 253-256

Author(s):

Siti Nurazira Mohd Daud ◽

Jan M. Podivinsky

Keyword(s):

Economic Growth ◽

Federal Government ◽

Government Debt

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Investing for Growth and Security

Fiscal Therapy ◽

10.1093/oso/9780190645410.003.0011 ◽

2019 ◽

pp. 193-206

Author(s):

William G. Gale

Keyword(s):

United States ◽

Research And Development ◽

Interest Rates ◽

Federal Government ◽

The United States ◽

Federal Spending ◽

President Obama ◽

Transit Systems ◽

Historical Levels

Besides its investment in people, the federal government makes critical investments in infrastructure and research and development. Because federal spending in these areas has fallen significantly in recent years and interest rates are low relative to historical levels, this chapter proposes sizable increases for both categories. The increases in infrastructure spending will provide the resources needed to restore and update aging roads, bridges, and public transit systems, while the increases in research and development will help the United States to explore cutting-edge technologies. Policymakers should also fund the military’s long-term plans through 2032, as outlined by President Obama, and let spending grow modestly afterward. That would allow for a continuing presence overseas. If a new war broke out, policymakers presumably would provide the additional temporary funds to ensure that America achieved its mission and emerged victorious.

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Government Debt and Long-Term Interest Rates

IMF Working Papers ◽

10.5089/9781451863239.001 ◽

2006 ◽

Vol 06 (63) ◽

pp. 1 ◽

Cited By ~ 9

Author(s):

Noriaki Kinoshita ◽

Keyword(s):

Interest Rates ◽

Government Debt

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Monetary easing may quicken in Brazil this year

Emerald Expert Briefings ◽

10.1108/oxan-db218047 ◽

2017 ◽

Keyword(s):

Monetary Policy ◽

Interest Rate ◽

Interest Rates ◽

Economic Recession ◽

Government Debt ◽

Domestic Demand ◽

Private Debt ◽

Content Type ◽

Positive Effects ◽

The Government

Significance At its first meeting of 2017, on January 10-11, the COPOM reduced the benchmark Selic interest rate to 13%. The 75-basis-point (bp) rate cut decision, the largest in nearly five years, accelerated the monetary easing cycle that started in October 2016. Economic recession has been relieving inflationary pressures and opening room for more intense cuts in interest rates. Impacts Further reductions of interest rates may contribute to controlling government debt. Private debt renegotiations at lower interest rates may facilitate a recovery in domestic demand and output. Any positive effects of monetary policy on activity may help contain popular dissatisfaction with the government.

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Re-election will still be tough for Canada’s Liberals

Emerald Expert Briefings ◽

10.1108/oxan-db243192 ◽

2019 ◽

Keyword(s):

Interest Rates ◽

Housing Market ◽

Government Debt ◽

Bank Of Canada ◽

Federal Election ◽

Content Type ◽

Opinion Polling ◽

Economic Difficulty ◽

Government Deficit ◽

Deficit Spending

Significance Canada’s next federal election must be held by October. Opinion polling is putting the Conservatives ahead. Impacts The Bank of Canada will likely keep interest rates steady for now. Wilson-Raybould and Philpott could move to other parties for the next election. Further economic difficulty and government deficit spending will increase government debt. The housing market will slow further but does not appear to be crashing. Tentative moves towards national pharmacare coverage will be talked up electorally but ultimately are unlikely to materialise.

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