An Analysis of Causes and Consequences of US Fiscal Imbalance

Abstract

In the 21st century, American fiscal balance is gradually being severely imbalance, after the financial crisis in 2008, due to the fiscal deficit and national debt became bigger and bigger.The goal of the thesis is to analyze the causes and consequences of US fiscal imbalance, furthermore, we estimate and analyze US long-run public finance sustainability based on the historical data and projected data. The thesis can be divided into five parts. The first and the last chapter are introduction and conclusion, part 2 is the description of the fiscal theory, the performance of US fiscal situation from 2003 to 2016 is in part 3, then part 4 is the long run finance sustainability which includes alternative balances and fiscal gap. The deficit increased sharply after three years of 2008, which even achieved 9.8% in 2009, then with gradual recovery from financial crisis, the fiscal US deficit started declining, however, it was still higher than 3 percent.The deficit caused high debt ratio, even achieved more than 100%. In the future, based on projected data, due to the increase of the debt is slower than the growth of GDP, the debt ratio in future will gradually decrease.

In the 21st century, American fiscal balance is gradually being severely imbalance, after the financial crisis in 2008, due to the fiscal deficit and national debt became bigger and bigger.The goal of the thesis is to analyze the causes and consequences of US fiscal imbalance, furthermore, we estimate and analyze US long-run public finance sustainability based on the historical data and projected data. The thesis can be divided into five parts. The first and the last chapter are introduction and conclusion, part 2 is the description of the fiscal theory, the performance of US fiscal situation from 2003 to 2016 is in part 3, then part 4 is the long run finance sustainability which includes alternative balances and fiscal gap. The deficit increased sharply after three years of 2008, which even achieved 9.8% in 2009, then with gradual recovery from financial crisis, the fiscal US deficit started declining, however, it was still higher than 3 percent.The deficit caused high debt ratio, even achieved more than 100%. In the future, based on projected data, due to the increase of the debt is slower than the growth of GDP, the debt ratio in future will gradually decrease.