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What Have We Learned from the Reagan Deficits and Their Disappearance?

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  • Benjamin M. Friedman

Abstract

This paper looks again at the U.S. deficit debate of the 1980s, this time with the benefit of the Commerce Department's newly revised data for that period and also in light of the experience of the 1990s when sizeable budget surpluses replaced chronic large deficits. The familiar conclusion that sustained government deficits at full employment depress private capital formation has stood up well in both regards. By contrast, the more recent experience in particular has sharply contradicted any simple notion that the government balance and the current account balance move in parallel. Other relevant issues include the equilibrium (that is, noninflationary) unemployment rate, the response of private saving to government dissaving, and the role of debt and equity in financing private capital formation.

Suggested Citation

  • Benjamin M. Friedman, 2000. "What Have We Learned from the Reagan Deficits and Their Disappearance?," NBER Working Papers 7647, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:7647
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    Cited by:

    1. Maria Panova, 2018. "Global aspects of the twin deficit hypothesis," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 5, pages 99-116.
    2. Suratno Suratno, 2018. "The Characteristics of Discourse in Pocapan Gara-Gara (a Case Study of Tristuti Rahmadi Suryasaputra’s Scripts)," European Journal of Social Sciences Education and Research Articles, Revistia Research and Publishing, vol. 5, ejser_v5_.
    3. Ercan Ekmekçioğlu, 2014. "International Investment (Trade) Factor and Its Effect on GDP: BRICS Case Study," European Journal of Social Sciences Education and Research Articles, Revistia Research and Publishing, vol. 1, ejser_v1_.

    More about this item

    JEL classification:

    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus

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