Are We Ricardian? Evidence from U.S. Counties

“The national debt of the United States is the total of all the obligations of the Treasury to pay money to the federal government's creditors. It consists of bonds, notes, and bills issued to the creditors when they lend money to the government ” (Heilbroner and Bernstein, 1989). Simply put, the national debt is the amount of money the government owes to its creditors. Its level has risen over the years as the government failed to finance payment to creditors. Abel and Bernanke state the deficit is the difference between government expenditures and tax revenues collected for a given year. Alexander Hamilton stated in 1781, “A national debt, if it is not excessive, will be to us a national blessing. ” James Madison disagreed and said in 1790, “a public debt is a public curse.” Each president, politician and American has had his or her own opinion. Reagan used deficits throughout his presidency and accumulated a large part of the current national debt. Clinton on the other hand, worked to decrease his budget deficit and in his final years as president even ran surpluses. Economists too have argued for years how deficit spending can affect the economy. The Ricardian equivalence hypothesis postulates when the government issues a tax cut, and/o