2015-16 IGM Year in Review

9 America Merrill Lynch), Jan Hatzius (Goldman Sachs), and Kenneth West (University of Wisconsin)—reprised their analysis at a conference held in Washington, DC on October 30. The meeting was jointly sponsored with The Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution. Their report was paired with a presentation by Thomas Laubach (board of governors of the Federal Reserve System) and John Williams (Federal Reserve Bank of San Francisco), which also analyzed the long run level of interest rates. The papers were discussed by Anna Cieslak (Duke University) and Maurice Obstfeld (International Monetary Fund). In November 2015, the IGM hosted a conference that was cosponsored with the Brookings Institution. Much attention is paid to the size of the federal debt, which amounts to more than $13 trillion. Yet, very little attention is paid to how the US Treasury borrows all that money, such as how much borrowing is short-term, long-term, at fixed rates, at rates that vary with inflation, etc. On November 10, the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution and Chicago Booth’s Initiative on Global Markets held a conference to discuss these issues. The background for the meeting was a new Brookings Institution Press book, The $13 Trillion Question: Managing the U.S. Government’s Debt. Robin Greenwood of the Harvard Business School argued that the Treasury should rely more on short-term (and less on long-term) borrowing than it has traditionally and that, particularly when the Federal Reserve pushes interest rates to zero, the Treasury and Fed should coordinate more than they generally do. John Cochrane of Stanford and the University of Chicago made the case for a radical change in the debt instruments the Treasury issues, suggesting that the Treasury rely heavily on debts with no fixed-maturity (perpetuals, in the jargon of the trade.) Guido Lorenzoni from Northwestern University and Jamie McAndrews of the Federal Reserve Bank of New York discussed the presentations. A closing panel discussion, featuring Seth B. Carpenter from the US Treasury, Charles Evans of the Federal Reserve Bank of Chicago, and Sara Sprung of Neuberger Berman, tackled these issues. $13 TRILLION QUESTION: MANAGING THE US GOVERNMENT’S DEBT