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Corporate Restructuring and the Budget Deficit Debate

Author

Listed:
  • Martin H. Wolfson

    (University of Notre Dame)

Abstract
This paper examines the assumptions underlying the view that large federal budget deficits crowd out private investment and create a twin trade deficit. These assumptions are contrasted with those of an alternative theory which emphasizes the importance of the institutional structures of the financial system in the context of the credit market. In particular, the paper argues that corporations were not crowded out of credit markets; indeed, they borrowed heavily to finance corporate restructuring (mergers, takeovers, leveraged buyouts, equity repurchases, etc.). This restructuring was encouraged by tax considerations, and the resulting loss of revenue contributed to the budget deficit.

Suggested Citation

  • Martin H. Wolfson, 1993. "Corporate Restructuring and the Budget Deficit Debate," Eastern Economic Journal, Eastern Economic Association, vol. 19(4), pages 495-520, Fall.
    • Handle: RePEc:eej:eeconj:v:19:y:1993:i:4:p:495-520
    as

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    File URL: http://web.holycross.edu/RePEc/eej/Archive/Volume19/V19N4P495_520.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Deficit;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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