Leonard E. Burman (Syracuse University, Maxwell School) presents Catastrophic Budget Failure: The Economic Consequences of a U.S. Government Debt Bubble (with Jeffrey Rohaly, Joseph Rosenberg & Katherine C. Lim (all of the Tax Policy Center)) at Columbia today as part of its Tax Policy Colloquium Series. Here is the abstract:

Continuation of current U.S. fiscal policy will lead to an enormous accumulation of debt with potentially disastrous economic consequences. Exacerbated by the recent economic turmoil and fueled by the willingness of creditors to lend at very low interest rates, there is significant risk that necessary fiscal reform will be put off. In this paper, we consider the causes, mechanisms, and macroeconomic fallout of a catastrophic budget failure — a situation in which markets’ perception of the credit worthiness of the U.S. government rapidly deteriorates, leaving it unable to access credit markets at any reasonable rate of interest and generating a high probability of the previously unthinkable: the U.S. government defaulting on its debt obligations.