1/6
Debt does matter, as Sharma argues here, but it matters because balance sheet structures matter. Fragile balance sheets limit operational flexibility, increase uncertainty, exacerbate volatility, and set off a wide range of financial distress costs.
ft.com/content/d49b53…
Debt does matter, as Sharma argues here, but it matters because balance sheet structures matter. Fragile balance sheets limit operational flexibility, increase uncertainty, exacerbate volatility, and set off a wide range of financial distress costs.
ft.com/content/d49b53…
2/6
But the impact that government deficits have on the balance sheet isn't simply to increase debt and financial fragility. Its impact depends partially on the structure of the debt and mainly on what the debt is used for. To the extent that debt is used to fund activity...
But the impact that government deficits have on the balance sheet isn't simply to increase debt and financial fragility. Its impact depends partially on the structure of the debt and mainly on what the debt is used for. To the extent that debt is used to fund activity...
3/6
that boosts real debt-servicing capacity, more debt can actually strengthen the balance sheet.
If the Biden administration funds the rebuilding of necessary infrastructure, in other words, or funds income transfers that strengthen domestic demand, the consequent fiscal...
that boosts real debt-servicing capacity, more debt can actually strengthen the balance sheet.
If the Biden administration funds the rebuilding of necessary infrastructure, in other words, or funds income transfers that strengthen domestic demand, the consequent fiscal...
4/6
deficit will be less than the resulting growth in the real economy, in which case the deficit will actually strengthen the American balance sheet, not weaken it.
That is why the debate shouldn't be about whether deficits are bad or good. They can be either, depending...
deficit will be less than the resulting growth in the real economy, in which case the deficit will actually strengthen the American balance sheet, not weaken it.
That is why the debate shouldn't be about whether deficits are bad or good. They can be either, depending...
5/6
on the specific underlying conditions. Deficits that fund rising income inequality, like the Trump tax cuts, almost certainly worsen the US balance sheet and repress economic growth. Deficits that fund badly-needed infrastructure almost certainly do the opposite.
on the specific underlying conditions. Deficits that fund rising income inequality, like the Trump tax cuts, almost certainly worsen the US balance sheet and repress economic growth. Deficits that fund badly-needed infrastructure almost certainly do the opposite.
6/6
The debate should be about policies most likely to lead to healthy, sustainable growth. For most of American history we were pragmatic about the role of government in supporting the economy. We should drop the ideology and return to that sense of pragmatism.
The debate should be about policies most likely to lead to healthy, sustainable growth. For most of American history we were pragmatic about the role of government in supporting the economy. We should drop the ideology and return to that sense of pragmatism.
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