ABSTRACT
This chapter discusses the feasibility of rolling over government debt forever. It examines the relationship between government deficits and the growth rate of government debt. A government deficit is the excess of government expenditures over government receipts during a particular period. A deficit concept, known as the total deficit or simply the deficit, includes interest payments by the government as part of government expenditure. The chapter uses gross national product (GNP) as the measure of national income, and thus uses the ratio of government debt to GNP—known as the debt-GNP ratio—to gauge the size of government debt. The most important factor determining the standard of living of future generations is the long-run rate of economic growth. Economists now use the term "Ponzi game" to describe a situation in which an entity sells securities to investors and never uses any of its own money to pay dividends or interest or to repay the principal.
