There are two ways that government budget deficits and an accumulating public debt might beburdensome to society.

A.

A higher public debt can burden future generations if the government purchases that national

deficits are used to finance do not lead to increases in real GDP and if the budget deficits

crowd out investment spending and thereby lead to a smaller future capital stock.

B.

To the extent that the public debt is purchased by residents of other nations, a higher public

debt can be burdensome if its accumulation leads to less domestic growth, so that future

generations that repay the debt will transfer a larger share of their incomes abroad when

they incur higher taxes to repay the debt