Economic Risks

Increases in federal debt add to the cost of living for households over time. A permanent 1%-of-GDP increase in the primary deficit results in a loss in household purchasing power of $300-1,250 per household.

One of the cornerstone assumptions in macroeconomic modeling is the reaction of the central bank to a policy shock. The political independence of the central bank has major impacts on how fiscal policy affects the economy.

The US enjoys a safe harbor investment premium—a value that investors place on US safety, soundness and stability. Even a modest move in risk premia would have profound implications for the US.