US: Growth will help ease long-term fiscal pain – Deutsche Bank

Analysts at Deutsche Bank tries to analyse that how much capacity there may be for US fiscal stimulus going forward in current economic environment.

Key Quotes

“US federal government debt as a percentage of GDP exploded in the wake of the financial crisis. Gross federal debt held by the public stood at roughly 77% of nominal output in fiscal year 2016, more than double its level in FY 2007 (35%). This begs the question as to how much capacity there may be for fiscal stimulus going forward. However, when we analyze the period from right before the "Great Recession" up until the present, weak nominal GDP growth—a function of depressed productivity—has had the most deleterious impact on federal government finances.”

“Our conclusion is that while debt to GDP will continue to rise, faster growth and the resulting widening of the tax base will moderate the extent of this increase.”