Debt Control: An Alternative Route to a Balanced Budget
14 Pages Posted: 24 Dec 2014
Date Written: December 23, 2014
This paper discusses an alternative route to a balanced budget, namely through debt control. Two models are compared: the debt brake which has been used in Switzerland since 2003 and the debt limitation model proposed by Compact for America. The paper concludes that the former, while apparently successful in Switzerland, is technically more sophisticated than necessary to control federal debt in the United States. As a debt control instrument, the Compact for America model is therefore preferable.
Keywords: fiscal policy, government debt, government deficit, balanced budget, structural deficit, economic growth, trend output
JEL Classification: E60, E61, E62, H50, H60, H61, H62, H63, H81
Suggested Citation: Suggested Citation