Edward Conard

Top Ten New York Times Bestselling Author

  • “Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
Upside of Inequality Oxford Unintended Consequences

AI Summary. The Congressional Budget Office projects that if interest rates rose to 1 percentage point above its baseline, federal debt held by the public would reach 222% of GDP by 2056, 47 percentage points above baseline, with primary deficits averaging 2.3% of GDP and annual growth 0.1 percentage point slower.

CBO Staff Congressional Budget OffIce
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If interest rates rise 1pp above CBO’s current extended baseline (a mean rate of 4% over 2026–2056), CBO projects federal debt held by the public will be 222% of GDP in 2056, versus 175% under the current baseline.

How much would higher interest rates raise projected federal debt?

Core argument: CBO projects that under a scenario in which interest rates rise to 1 percentage point above its extended baseline, debt held by the public would reach 222% of GDP in fiscal year 2056, 47 percentage points above the extended baseline.

Under a scenario in which interest rates increased until they were 1 percentage point higher than in CBO’s extended baseline, primary deficits—that is, deficits excluding net outlays for interest—would average 2.3% of GDP over the 2026–2056 period, 0.2 percentage points larger than in the extended baseline. Debt held by the public would grow to 222 percent of GDP in fiscal year 2056, 47 percentage points larger than in the extended baseline. Average annual GDP growth over the 2026–2056 period would be 0.1 percentage point slower than in CBO’s extended baseline, and the average interest rate on federal debt would be 0.7 percentage points higher.

Takeaways by Macro Roundup® AI

  1. CBO projects that under a scenario in which interest rates rise to 1 percentage point above its extended baseline, debt held by the public would reach 222% of GDP in fiscal year 2056, 47 percentage points above the extended baseline.
  2. Primary deficits, which exclude net outlays for interest, would average 2.3% of GDP over 2026–2056 in CBO’s higher-interest-rate scenario, 0.2 percentage points larger than in its extended baseline.
  3. Under CBO’s higher-interest-rate scenario, average annual GDP growth over 2026–2056 would be 0.1 percentage point slower and the average interest rate on federal debt 0.7 percentage points higher than in its extended baseline.

Related Articles:

  • The Budget and Economic Outlook: 2026 to 2036 — The Congressional Budget Office projects the federal deficit will grow from $1.9tn (5.8% of GDP) to $3.1tn (6.7%) over a decade, above the 3.8% averaged over the past 50 years, with rising net interest costs driving much of the increase. Federal debt held by the public is projected to rise from 101% to 120% of GDP.
  • How Might Fiscal Policy Respond to the Rise of Artificial Intelligence? — The Congressional Budget Office estimates that a permanent 0.5 percentage point increase in annual productivity growth would lower publicly held federal debt after 30 years by 39% of GDP, offsetting roughly half the projected rise from 101% of GDP to 175%. Higher revenue and slower spending growth outweigh higher interest costs.
  • Soaring Bond Yields, Gaping Deficits and Towering Debts: What Could Go Wrong? — An analysis of 22 rich countries estimates that if each refinanced its entire debt at current five-year bond yields, Britain would need the largest primary surplus to stabilize its debt-to-GDP ratio, about 1.5%, followed by Italy at 1.4%, France at 1.2% and America at 1%.

AI Summary. Estimated sustainable government net debt limits across 25 OECD countries average 234% of GDP under historical interest-rate and growth assumptions (221% for the US) and 214% under current rates (186% for the US). If interest rates rise systematically with debt, the model yields no solution for the US, UK, France, Italy, Greece, and Japan.

Mark Warshawsky American Enterprise Institute
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Warshawsky calculates the US has a sustainable net debt limit, “the lowest level of debt at which a country can no longer service its sovereign debt and must effectively default,” of 186% of GDP, which he forecasts will be reached in ~15 years under current policy and economic conditions.

How high can government debt rise before it becomes unsustainable?

Core argument: Sustainable net debt limits across the US and 24 other OECD countries average 234% of GDP under historical interest rate–growth differentials and 221% for the US, falling to 214% on average and 186% for the US under current, higher interest rates and growth.

Using historical, current, and dynamic interest rate-to-economic growth differentials, countries’ sustainable debt limits are calculated on a net of central bank holdings of government debt basis. Sustainable net debt limits average 234% of GDP for these countries assuming historical rates and economic growth (221% for the US), 214% assuming (higher) current interest rates and economic growth (186% for the US). If, however, interest rates were to rise systematically with debt according to conservative assumptions, there is no model solution for France, Greece, Japan, Italy, the UK, and the US, given their current high debt levels; the average sustainable limit is 178% for the other countries. A reasonable conclusion to draw for the US is that the fiscal path under current policy and trends with rising interest rates is not sustainable in the short to intermediate term. A major fiscal consolidation package will be needed soon, as interest rates rise, unless significantly higher inflation or capital controls will result.

Takeaways by Macro Roundup® AI

  1. Sustainable net debt limits across the US and 24 other OECD countries average 234% of GDP under historical interest rate–growth differentials and 221% for the US, falling to 214% on average and 186% for the US under current, higher interest rates and growth.
  2. If interest rates rise systematically with debt under conservative assumptions, the model yields no solution for France, Greece, Japan, Italy, the UK, and the US given their current high debt levels, while the average limit for the remaining countries is 178%.
  3. A reasonable conclusion is that the US fiscal path under current policy and trends with rising interest rates is not sustainable in the short to intermediate term, and a major fiscal consolidation package will be needed soon unless significantly higher inflation or capital controls result.

Related Articles:

  • Soaring Bond Yields, Gaping Deficits and Towering Debts: What Could Go Wrong? — An analysis of 22 rich countries estimates that if each refinanced its entire debt at current five-year bond yields, Britain would need the largest primary surplus to stabilize its debt-to-GDP ratio, about 1.5%, followed by Italy at 1.4%, France at 1.2% and America at 1%.
  • How Might Fiscal Policy Respond to the Rise of Artificial Intelligence? — The Congressional Budget Office estimates that a permanent 0.5 percentage point increase in annual productivity growth would lower publicly held federal debt after 30 years by 39% of GDP, offsetting roughly half the projected rise from 101% of GDP to 175%. Higher revenue and slower spending growth outweigh higher interest costs.
  • Can AI Avert the Impending Federal Budget Crisis? — U.S. GDP per capita, about $87,000, is projected to reach $102,000 by 2035 with 1.8% annual productivity growth, or $110,000 with 2.7% growth. Because the healthcare sector has been slow to adopt AI, health spending is projected to rise from 18.3% of GDP to 21% under slower growth and 21.7% under faster growth.

AI Summary. An analysis of 22 rich countries estimates that if each refinanced its entire debt at current five-year bond yields, Britain would need the largest primary surplus to stabilize its debt-to-GDP ratio, about 1.5%, followed by Italy at 1.4%, France at 1.2% and America at 1%.

Economist Staff The Economist
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Refinancing the entire US debt stock at the current five-year borrowing rate, on current growth forecasts, would require a primary surplus of 1% of GDP to hold the debt ratio stable, a fiscal consolidation of 4.7pp. In October 2025, it would have required 2.3pp.

How much belt tightening would rich countries need to stabilize debt?

Core argument: The Economist calculates that Britain would need the largest primary surplus of 22 rich countries, about 1.5% of GDP, to hold its debt-to-GDP ratio stable if it replaced its entire debt stock at today’s five-year yields.

The Economist calculated what would happen if rich countries had to replace their entire debt stocks at today’s five-year bond yields, using IMF forecasts for nominal growth. Out of 22 countries, Britain would need to run the largest primary surplus, of about 1.5% of GDP, merely to keep its debt-to-GDP ratio stable. Italy and France are next, needing surpluses of 1.4% and 1.2%, respectively. America is not far behind, requiring one of 1%. Japan can run a deficit of 0.8% since its growth is estimated to outpace the interest rate on its debt. America is running a primary deficit of nearly 4% of GDP, meaning significant belt tightening of nearly five percentage points of GDP is needed to stabilise its debt ratio at today’s borrowing costs. The situation is deteriorating fast as a result of persistent deficits and surging yields. Just a year ago America required an adjustment of more than two percentage points less than it does today.

Takeaways by Macro Roundup® AI

  1. The Economist calculates that Britain would need the largest primary surplus of 22 rich countries, about 1.5% of GDP, to hold its debt-to-GDP ratio stable if it replaced its entire debt stock at today’s five-year yields.
  2. America requires a primary surplus of 1% of GDP to stabilise its debt ratio at today’s borrowing costs while running a primary deficit of nearly 4%, implying belt tightening of nearly five percentage points of GDP, by The Economist’s calculation.
  3. Japan can run a primary deficit of 0.8% of GDP and still keep its debt burden stable because its growth is estimated to outpace the interest rate on its debt, while Italy and France need surpluses of 1.4% and 1.2%.

Related Articles:

  • America’s Risky Debt: What Markets See That Policymakers Don’t — Two market-based measures suggest the safety premium investors pay to hold US Treasuries has compressed toward zero and at times reversed: the spread between top-rated corporate bonds and Treasuries after stripping out default risk, and the gap between currency-hedged foreign G10 government yields and Treasury yields at the same maturity, where longer-maturity comparisons now favor foreign bonds.
  • The United States Capital Structure — Because Social Security and Medicare benefits are politically untouchable, retirees effectively hold the most senior claim on US government resources while Treasury bondholders hold the riskiest one. On this argument, bondholders absorb adverse fiscal shocks through surprise inflation, financial repression, or both.
  • How Might Fiscal Policy Respond to the Rise of Artificial Intelligence? — The Congressional Budget Office estimates that a permanent 0.5 percentage point increase in annual productivity growth would lower publicly held federal debt after 30 years by 39% of GDP, offsetting roughly half the projected rise from 101% of GDP to 175%. Higher revenue and slower spending growth outweigh higher interest costs.

AI Summary. US Treasuries erased nearly all gains that followed the Treasury Department's surprise decision to increase buybacks of longer-dated bonds, with the 30-year yield rising above 5.27% and the 10-year touching 4.71%. The reversal signals the move has done little to ease concern about surging government debt.

Michael MacKenzie and Alice Gledhill Bloomberg
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The 30-year yield rose ~7bps to as much as 5.27%, and the 10-year yield hit 4.71%, erasing “almost all” the gains that followed Treasury’s surprise decision to increase buybacks of longer-dated bonds.

Do bigger bond buybacks ease concerns about surging government debt?

Core argument: The US 30-year Treasury yield rose more than seven basis points to as much as 5.27%, returning to where it stood just ahead of the Treasury Department's buyback announcement, before paring the gain.

US Treasuries erased almost all of the gains that followed the Trump administration’s surprise decision to increase buybacks of longer-dated bonds, signaling the move has done little to alleviate the angst about the surging government debt that has pushed some yields to the highest in close to two decades. The 30-year yield on Thursday rose over seven basis points to as much as 5.27%, where it was just ahead of the US Treasury Department’s announcement early Wednesday, before paring the gain. The 10-year yield touched 4.71%, just shy of its highest level since early 2025.

Takeaways by Macro Roundup® AI

  1. The US 30-year Treasury yield rose more than seven basis points to as much as 5.27%, returning to where it stood just ahead of the Treasury Department's buyback announcement, before paring the gain.
  2. US Treasuries erased almost all of the gains that followed the Trump administration's surprise decision to increase buybacks of longer-dated bonds, suggesting the move has done little to alleviate angst about surging government debt.
  3. The US 10-year yield touched 4.71%, just shy of its highest level since early 2025, as angst over government debt pushed some yields to the highest in close to two decades.

Related Articles:

  • Bessent Boosts Debt Buybacks After Climb in Treasury Yields — The US Treasury announced it is at least doubling the size of its liquidity support buyback operations for government debt maturing in 10 to 30 years, following long-dated yields reaching their highest levels in years. Yields on the longest bond fell nearly 10 basis points to 5.185%.
  • The Coming Great Repression? — Across countries and over time, higher public debt burdens are associated with lower relative returns on government bonds, the opposite of standard risk-premium predictions. The authors estimate financial repression—making banks captive bond buyers and loading them with low-return reserves—contributed 90.7 percentage points of GDP to Britain's postwar debt reduction, versus 20.3 from surprise inflation.
  • The United States Capital Structure — Because Social Security and Medicare benefits are politically untouchable, retirees effectively hold the most senior claim on US government resources while Treasury bondholders hold the riskiest one. On this argument, bondholders absorb adverse fiscal shocks through surprise inflation, financial repression, or both.

AI Summary. A long-run model in which health spending, the federal budget, and capital investment are jointly determined by supply and demand projects U.S. federal debt reaching 151% of GDP in 2036 and 309% in 2056, versus the Congressional Budget Office's 120% and 175%. Rising real interest rates compound deficits and debt.

Mark Warshawsky American Enterprise Institute
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Warshawsky projects US debt-to-GDP will be 151% in 2036, well above CBO’s 120% projection, as higher real rates and a dynamic Baumol cost-disease effect will increase healthcare spending relative to GDP in an aging economy.

Does modeling health spending and interest rates jointly raise debt projections?

Core argument: The model projects U.S. federal debt-to-GDP at 151% in 2036, 218% in 2046, and 309% in 2056, above CBO's 120% in 2036 and 175% in 2056.

The Congressional Budget Office makes certain simplifying assumptions on health care spending, and is based on current law. By contrast, in the model presented in this paper, these variables are simultaneously determined by supply and demand, based on logical functional forms and parameter estimates from the literature or empirical analysis, and the model is based on current policy. This approach better reflects real economic relationships—between health care spending, the federal budget, and investment in capital—and changing underlying conditions, especially demographics. Within the next twenty or so years, the model predicts that federal government debt will grow significantly beyond historical experience, to be judged unsustainable because the real interest rate exceeds real economic growth. Debt-to-GDP will be 151% in 2036, 218% in 2046, and 309% in 2056, compared to CBO’s 120% in 2036 and 175% in 2056. Real interest rates rise for several decades, ratcheting interest payments, deficits, and debt in a vicious cycle.

Takeaways by Macro Roundup® AI

  1. The model projects U.S. federal debt-to-GDP at 151% in 2036, 218% in 2046, and 309% in 2056, above CBO's 120% in 2036 and 175% in 2056.
  2. The model judges the projected debt path unsustainable because the real interest rate exceeds real economic growth, with real rates rising for several decades and ratcheting up interest payments, deficits, and debt.
  3. Unlike CBO's current-law projections with simplifying assumptions on health care spending, the model determines these variables simultaneously through supply and demand under current policy, using functional forms and parameter estimates from the literature or empirical analysis.

Related Articles:

  • Can AI Avert the Impending Federal Budget Crisis? — U.S. GDP per capita, about $87,000, is projected to reach $102,000 by 2035 with 1.8% annual productivity growth, or $110,000 with 2.7% growth. Because the healthcare sector has been slow to adopt AI, health spending is projected to rise from 18.3% of GDP to 21% under slower growth and 21.7% under faster growth.
  • How Might Fiscal Policy Respond to the Rise of Artificial Intelligence? — The Congressional Budget Office estimates that a permanent 0.5 percentage point increase in annual productivity growth would lower publicly held federal debt after 30 years by 39% of GDP, offsetting roughly half the projected rise from 101% of GDP to 175%. Higher revenue and slower spending growth outweigh higher interest costs.
  • The Budget and Economic Outlook: 2026 to 2036 — The Congressional Budget Office projects the federal deficit will grow from $1.9tn (5.8% of GDP) to $3.1tn (6.7%) over a decade, above the 3.8% averaged over the past 50 years, with rising net interest costs driving much of the increase. Federal debt held by the public is projected to rise from 101% to 120% of GDP.

AI Summary. The authors find no statistically significant evidence that $190bn in federal emergency K-12 school aid mitigated pandemic learning loss or raised district spending. Districts qualifying for additional funds saw local revenues fall by $907 per pupil over three years, about 8% of pre-pandemic average, roughly 80% from property taxes.

Jeffrey Clemens, Philip Hoxie and Stan Veuger National Bureau of Economic Research
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Exploiting a discontinuity in K-12 public school districts’ qualification for Covid emergency funding (ESSR), Clemens et al find that the funds did not mitigate learning loss. To a large extent, local districts used them to lower property taxes.

Do federal emergency education grants reduce student learning loss?

Core argument: Districts crossing the 5% poverty cutoff for additional ESSER funds saw local revenues fall an estimated $907 per pupil over three years, about 8% of the pre-COVID average.

Emergency funding for K-12 public schools was an important component of recession spending packages during COVID, involving $190 billion in additional expenditure. We see no evidence that ESSER funds helped to mitigate learning loss, at least in the short run. We find no statistically significant evidence that districts increased expenditures in SY 2021 or SY 2022. We do find evidence that districts that qualified for additional ESSER funds had statistically significant reductions in local revenues that were in excess of their ESSER funds. This pass-through of federal funds may partially explain why ESSER had minimal impacts on learning loss for districts around the 5% poverty threshold. Our estimates suggest that over the three years, crossing the qualification cutoff for additional ESSER funds is associated with a $907 per pupil decrease in local revenues, or about 8% of the pre-COVID average. We show the decline in local revenues as an event study in Figure 3, which includes a flat pre-COVID trend in local revenues per pupil across the qualification threshold. In Table 5,Column 5 [], we can see that about 80% of the revenue decline came from decreases in revenues from property taxes, [which fell] by $718 per pupil across the 3 years. The findings apply specifically to districts in the neighborhood of the 5% poverty threshold for qualifying for additional ESSER funds.

Takeaways by Macro Roundup® AI

  1. Districts crossing the 5% poverty cutoff for additional ESSER funds saw local revenues fall an estimated $907 per pupil over three years, about 8% of the pre-COVID average.
  2. About 80% of that local revenue decline came from property taxes, which fell by $718 per pupil across the three years.
  3. The authors find no evidence that ESSER emergency K-12 funding, totaling $190 billion, mitigated learning loss in the short run, and no statistically significant increase in district expenditures in SY 2021 or SY 2022.

Related Articles:

AI Summary. The Congressional Budget Office estimates that a permanent 0.5 percentage point increase in annual productivity growth would lower publicly held federal debt after 30 years by 39% of GDP, offsetting roughly half the projected rise from 101% of GDP to 175%. Higher revenue and slower spending growth outweigh higher interest costs.

Karen Dynan, Douglas Elmendorf and Louise Sheiner National Bureau of Economic Research
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CBO baseline projects debt-to-GDP rising from 101% in 2026 to 175% in 2056. Dynan et al. study how AI might modify that projection. In all but their most optimistic scenario, TFP grows 0.5pp faster, and AI offsets 39–49 pp of that 74pp increase.

How much would faster productivity growth reduce federal debt?

Core argument: A permanent 0.5 pp increase in annual total factor productivity growth would lower publicly held federal debt after 30 years by 39% of GDP relative to CBO's extended baseline, offsetting roughly half of the projected rise.

[In the Base Case], faster economic growth [improves the federal budget and debt outlook] through four channels. First, [higher] incomes increase federal revenue, [while] the progressive tax system [modestly] raises revenue relative to GDP. CBO [estimates] that a [permanent] 0.5 pp increase in annual TFP growth would raise revenue after [30 years] by 0.14% of GDP. Second, [although] faster growth increases [some] federal spending, spending rises [more slowly] than GDP, [reducing noninterest outlays] relative to GDP. Under our [assumptions], discretionary spending falls from 6.1% of GDP in 2025 to 4.5% in 2056. Third, because faster growth does not [change the stock of] existing debt, that debt becomes smaller relative to GDP. Fourth, [stronger] growth generally raises interest rates, increasing the [cost] of new borrowing and [refinancing] existing debt. This represents a partial offset to the [fiscal gains]. [On balance], additional annual TFP growth of 0.5 pp would lower publicly held federal debt after [30 years] by 39% of GDP relative to CBO’s extended baseline. CBO’s extended baseline shows federal debt rising from 101% of GDP in 2026 to 175% in three decades, so this hypothesized increase in growth would offset roughly half of that projected rise.

Takeaways by Macro Roundup® AI

  1. A permanent 0.5 pp increase in annual total factor productivity growth would lower publicly held federal debt after 30 years by 39% of GDP relative to CBO's extended baseline, offsetting roughly half of the projected rise.
  2. CBO's extended baseline shows federal debt rising from 101% of GDP in 2026 to 175% three decades later, and CBO estimates a permanent 0.5 pp increase in TFP growth would raise revenue after 30 years by 0.14% of GDP.

Related Articles:

  • Can AI Avert the Impending Federal Budget Crisis? — U.S. GDP per capita, about $87,000, is projected to reach $102,000 by 2035 with 1.8% annual productivity growth, or $110,000 with 2.7% growth. Because the healthcare sector has been slow to adopt AI, health spending is projected to rise from 18.3% of GDP to 21% under slower growth and 21.7% under faster growth.
  • U.S. Treasury Investors Are Long in AI — The authors find U.S. government debt has a large positive productivity beta, because the tax code makes federal revenue highly sensitive to productivity growth while spending commitments change little, leaving bondholders implicitly long productivity growth. They argue greater market confidence in sustained productivity gains from AI could substantially reprice government debt, lowering nominal yields.
  • The Budget and Economic Outlook: 2026 to 2036 — The Congressional Budget Office projects the federal deficit will grow from $1.9tn (5.8% of GDP) to $3.1tn (6.7%) over a decade, above the 3.8% averaged over the past 50 years, with rising net interest costs driving much of the increase. Federal debt held by the public is projected to rise from 101% to 120% of GDP.

AI Summary. Public debt in advanced economies has risen steadily, limiting governments' ability to cushion higher energy prices. Cyclically adjusted primary deficits averaged 1.9% of GDP in advanced economies since 2022 versus 1.1% over the two preceding decades, and 1.8% in emerging markets versus 0.1% from 2000–2019.

BIS Staff Bank of International Settlements
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BIS warns, “Countries can no longer count on nominal growth to stabilise debt dynamics. They now must run primary surpluses or significantly smaller deficits to maintain stable debt-to-GDP ratios.”

Has rising public debt reduced governments' ability to cushion energy price shocks?

Core argument: Cyclically adjusted primary deficits in advanced economies averaged 1.9% of GDP from 2022 onwards, nearly double the 1.1% recorded over the two preceding decades.

Many countries entered the current energy crisis with limited fiscal space. Public debt in [Advanced Economies] (AE) has risen steadily over recent years (Graph 15.A), reducing governments’ ability to cushion fallout from higher energy prices. Although the increase partly reflects successive shocks, from the Covid-19 recession to the war in Ukraine, persistent failures to make meaningful progress on fiscal consolidation during economic expansions have also played a part. Cyclically adjusted primary deficits in AEs averaged 1.9% of GDP from 2022 onwards (Graph 15.B), nearly double the 1.1% recorded over the two preceding decades. [Emerging market economies] (EME) have seen an even sharper deterioration (1.8% since 2022 versus 0.1% between 2000 and 2019). Fiscal positions are set to remain strained over the coming years. Debt servicing costs are unlikely to ease soon, as higher interest rate payments continue to weigh on fiscal accounts (Graph 15.C). Deficits in 2027 are projected at or above 2025 levels in most jurisdictions.

Takeaways by Macro Roundup® AI

  1. Cyclically adjusted primary deficits in advanced economies averaged 1.9% of GDP from 2022 onwards, nearly double the 1.1% recorded over the two preceding decades.
  2. Emerging market economies saw a sharper fiscal deterioration, with cyclically adjusted primary deficits averaging 1.8% of GDP since 2022 versus 0.1% between 2000 and 2019.
  3. Deficits in 2027 are projected at or above 2025 levels in most jurisdictions, with debt servicing costs unlikely to ease as higher interest rate payments weigh on fiscal accounts.

Related Articles:

  • Global Debt Report 2026 — Gross central government borrowing across OECD countries rose 7% to a record $17tn, about 23% of GDP, and is projected to reach roughly $18tn, or 24% of GDP. The United States and Japan account for close to 80% of the area's refinancing requirements, with the US share rising from 57% to 70%.
  • Are Government Bonds Safe in Times of War and Pandemic? — Government bonds severely underperform in wartime, in absolute terms and relative to equities, housing, and economic growth, unlike in financial crises when bonds tend to outperform stocks. The U.S. and U.K. reduced war-driven debt-to-GDP ratios without explicit default, using surprise inflation and financial repression that shifted fiscal burdens onto bondholders.
  • Our Thoughts on Large US Deficits and Their Impact on Bond Yields — Total borrowing in the US is about average despite high government deficits, as high public borrowing has contributed to the need for higher interest rates that have depressed private sector borrowing. Risk premiums on long-dated debt look about average, with no market signs that economic or debt limits are currently being hit.