CBO Says: Have a Nice Day
By Arnold Kling
I mean, nothing says “have a nice day” like an issue brief from the Congressional Budget Office on the prospects for a U.S. sovereign debt crisis. On the potential for inflating away the problem, the brief says,
On balance, the increase in tax revenues resulting from higher inflation would be more than offset by higher payments for benefit programs and higher interest payments as the outstanding debt rolled over and ongoing deficits required the issuance of more debt.
If most of our problem consisted of legacy debt, inflation would be the answer. However, since most of our problem is future unfunded liabilities, which increase with inflation, the inflation solution does not work quite so well.
Read the whole issue brief. There is no way that excerpts can do it justice.