Restoring Sustainable Macroeconomic Policies in the United States

By looking at the macroeconomic frameworks and experiences of countries such as Germany, Sweden, and Switzerland, Restoring Sustainable Macroeconomic Policies in the U.S. presents a way for the United States to normalize fiscal and monetary policy in order to achieve sustainable debt in the post-COVID-19 era.

Slowing economic growth and debt fatigue continue to hamper fiscal policy in the United States. The question is whether there is an alternative path to the one projected in CBO long term forecasts, and if so, how citizens can choose this alternative path. The experiences of Germany, Sweden, and Switzerland reveal that an alternative path of sustainable debt is possible, and that citizens in a democratic society are capable of choosing that path. This book explores the potential impact of Swiss-style fiscal rules on the U.S. budget and the economy over the next three decades. The dynamic simulation analysis reveals that with these fiscal rules in place, it is possible for the U.S. to stabilize and reduce debt to sustainable levels over the forecast period. The government must preserve policy credibility by demonstrating a commitment to meet the challenges of economic shocks. The recent economic crises have provided a learning experience, and the rules-based macroeconomic framework required for this new era may differ significantly from that of the past. With new fiscal rules in place, the U.S. can restore long term economic growth. However, empirical analysis reveals how difficult this challenge will be, and why the U.S. is likely to continue to experience debt fatigue.

Chapter 1. Debt Fatigue and Debt Sustainability in Historical Perspective

Chapter 2. Understanding the U.S. Debt Crisis

Chapter 3. Debt Fatigue in the U.S. as a Failure of Macroeconomic Policy

Chapter 4. The Zombies are Coming

Chapter 5. A Look Back at the New Era of Fiscal Rules

Chapter 6. 2^nd Generation Fiscal Rules for the U.S.

Chapter 7. The Merrifield-Poulson Rules for Restoring a Great Moderation in Fiscal Policy

Chapter 8. Institutional Reforms to Restore a ‘Great Moderation’ in Monetary and Fiscal Policy: The Friedman Solution