The US public debt problem

• Main Authors: Yeo, Teck Wei, Cham, Taw Zheng, Barus, Ivan Louise
• Other Authors: School of Humanities and Social Sciences
• Format: Final Year Project
• Language: English
• Published: 2013
• Subjects: DRNTU::Social sciences::Economic theory::Macroeconomics
• Online Access: http://hdl.handle.net/10356/51337
• Institution: Nanyang Technological University

What are the factors that have contributed to the rise in US public debt over the past 30 years? Based on these factors, what are the implications for US public debt management? In this paper, we used the Government Budget Constraint (GBC) as an analytical framework to provide a qualitative analysis on the evolution of US public debt from 1980 to 2011. We identified the high level of defence spending as well as the persistent use of deficit financing to be the main factors leading to the rise in public debt. This proposition was later supported by the OLS regression results. In addition, our findings identified the rise in primary deficit ratio to be the most significant factor that led to the rise of public debt. As such, we recommend the US government to cut down on federal expenditure in specific sectors and conduct a tax reform to better manage its public debt.