Effects of Government Budget Deficits on National Savings and Investment

March 1st, 2014
in econ_news, syndication

Econintersect: The Congressional Budget Office (CBO) has studied the effects of changes in federal budget deficits on aggregate output and income. Some of the conclusions:

  • Small Estimate of the effect of deficits on investment - Each additional dollar of deficit leads to a 15 cent decline in domestic investment. In particular, every additional dollar of deficit is projected to increase private saving by 61 cents and to reduce national saving by 39 cents, and every dollar’s decline in national saving is projected to lead to a 61 cent increase in the amount of foreign capital invested in the United States.

Follow up:


  • Central Estimate of the effects of deficits on investment - Each additional dollar of deficit leads to a 33 cent decline in domestic investment. In particular, every additional dollar of deficit is projected to increase private saving by 43 cents and reduce national saving by 57 cents, and every dollar’s decline in national saving is projected to lead to a 24 cent increase in the amount of foreign capital invested in the United States.
  • Large Estimate of the effect of deficits on investment - Each additional dollar of deficit leads to a 50 cent decline in domestic investment. In particular, every additional dollar of deficit is projected to increase private saving by 29 cents and reduce national saving by 71 cents, and every dollar’s decline in national saving is projected to lead to a 29 cent increase in the amount of foreign capital invested in the United States.

[click on image below to read the complete study]

Source: http://www.cbo.gov/sites/default/files/cbofiles/attachments/45140-NSPDI_workingPaper.pdf









Make a Comment

Econintersect wants your comments, data and opinion on the articles posted.  As the internet is a "war zone" of trolls, hackers and spammers - Econintersect must balance its defences against ease of commenting.  We have joined with Livefyre to manage our comment streams.

To comment, just click the "Sign In" button at the top-left corner of the comment box below. You can create a commenting account using your favorite social network such as Twitter, Facebook, Google+, LinkedIn or Open ID - or open a Livefyre account using your email address.















 navigate econintersect.com

Blogs

Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day
Weather

Newspapers

Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government
     

RSS Feeds / Social Media

Combined Econintersect Feed
Google+
Facebook
Twitter
Digg

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution

Contact

About

  Top Economics Site

Investing.com Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2017 Econintersect LLC - all rights reserved