Edward Conard

Top Ten New York Times Bestselling Author

  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “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
  • “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
  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “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 very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “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 must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
Upside of Inequality Oxford Unintended Consequences

AI Summary. With US federal debt at 100% of GDP and primary deficits projected near 3%, the measures under consideration would add 1–2 points, implying a sustained 4–5% primary deficit and rapid debt growth. Stabilizing the debt ratio would require an adjustment worth 16–20% of the federal budget.

Olivier Blanchard Peterson Institute For International Economics
Date Posted:

.@ojblanchard1 argues that predictions of “catastrophe” due to lower taxes, deportations, and tariffs are overstated. However, if the Fed maintains its 2% inflation target, these policies will require higher interest rates, likely resulting in friction.

How large an adjustment would stabilizing the debt ratio require?

Core argument: U.S. federal debt stands at 100% of GDP, with a deficit of roughly 6.5% and a primary deficit of about 3.5%, and the measures Trump is considering would raise the primary deficit by roughly 1–2% of GDP.

The ratio of federal debt to GDP is 100%. The deficit is around 6.5% of GDP, and the primary deficit is around 3.5%. If the 2017 tax cuts were left to expire, that would shrink the deficit by roughly 1% of GDP in 2025. But even under this assumption, the Congressional Budget Office forecasts were for primary deficits of about 3% as far as the eye could see. The measures that Trump is considering would increase that number by roughly 1 to 2%, leading to a 4 to 5% sustained primary deficit and a rapid increase in the debt ratio. Were the interest rate and the growth rate to be roughly equal, which looks like a reasonable hypothesis, this would imply an adjustment of the primary deficit of 4 to 5% of GDP, or equivalently, 16 to 20% of the federal budget, to stabilize the debt ratio. It is likely, however, that a further fiscal expansion, starting from an economy close to full employment, will lead to inflation and, by implication, higher Fed policy rates and a stronger dollar.

Takeaways by Macro Roundup® AI

  1. U.S. federal debt stands at 100% of GDP, with a deficit of roughly 6.5% and a primary deficit of about 3.5%, and the measures Trump is considering would raise the primary deficit by roughly 1–2% of GDP.
  2. Stabilizing the debt ratio with a sustained primary deficit of 4–5% of GDP would require an adjustment of 4–5% of GDP, equivalent to 16–20% of the federal budget, if interest and growth rates are roughly equal.
  3. Further fiscal expansion, starting from an economy close to full employment, is likely to lead to inflation and, by implication, higher Fed policy rates and a stronger dollar.

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