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THE NATIONAL DEBT CONTROVERSY
Author(s) -
Randall G. Holcombe,
John D. Jackson and,
Asghar Zardkoohi
Publication year - 1981
Publication title -
kyklos
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.766
H-Index - 58
eISSN - 1467-6435
pISSN - 0023-5962
DOI - 10.1111/j.1467-6435.1981.tb01183.x
Subject(s) - ceteris paribus , internal debt , debt , economics , debt levels and flows , debt to gdp ratio , monetary economics , recourse debt , debt service coverage ratio , external debt , senior debt , debt ratio , finance , microeconomics
SUMMARY Some analysts have argued that the burden of public debt is passed on to the future because public debt competes for funds in private capital markets, which lowers capital accumulation. Others argue that using debt finance rather than taxation will have no real effects because an increase in debt will be offset by an equal increase in savings, in anticipation of the higher future taxes that will be needed to service the debt. An empirical test finds that savings changes are only about 20 percent of debt changes, ceteris paribus, implying that most of the burden of the debt is passed on to the future through reduced capital accumulation.