Perspectives on global fiscal policy

Most major industrial economies are projected to see continuing marked increased in government debt over the next several decades, if current policies are continued. This reflects factors such as the aging of populations, coupled with entitlement programs that are not means-tested, the costs of clean-energy investments, and the growing costs of servicing debts. Experience shows that it would be possible to arrest this growth, but it will involve making some painful choices to be made. In the US, projections of debt growth have not worsened in recent years, while earlier upward revisions reflected in large part revenue actions. Despite the voiced concerns, analysis suggests that the crowding out of private investments by the growth of US debt has had, and will continue of have, only modest effects on trend growth and don’t point clearly to greater risks of a financial crisis or high inflation.