US Debt-to-GDP Ratio Expected to Continue Rising Due to Persistent Primary Deficit

A new study published in the National Tax Journal has found that the United States' debt-to-GDP ratio is likely to continue rising due to a persistent primary deficit.

The research, conducted by investigators at the Federal Reserve Board, used a sophisticated model to analyze the data generation process for the primary balance and found that incorporating serial correlation in the innovations to this process led to wider distributions of debt outcomes with more debt accumulation.

The study's findings suggest that one-time legislative consolidation is less effective at stabilizing the debt ratio than a series of smaller but correlated legislative innovations consistent with those seen in the pre-2000 period.