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Abstract
The ballooning of public debt in industrial countries over the past two decades of relative world peace and prosperity is unprecedented. Increasingly, this is a problem. Higher levels of government debt boost real interest rates, retard the accumulation of private capital, and limit gains in living standards. Perhaps most worrisome is that populations will age noticeably over the coming decades, exacerbating budgetary pressures because of pension and health care demands. As a result, future public debt paths on current policies appear unsustainable in most industrial countries. Most governments recognize the problems of persistently high deficits and debt; some progress with fiscal consolidation has been made; and further progress is expected over the latter part of the 1990s. Still, North American and most European countries have made only limited progress to date in putting their ratios of public debt to GDP on downward trajectories; and debt in Japan, which has been most concerned about the fiscal implications of its aging population, seems poised to rise sharply in the coming years.
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