If the President’s budget were enacted by Congress, and OMB’s projections over the next decade hold, it would almost certainly mean economic stagnation punctuated by recession over the next decade. Would it also mean austerity, however? Let’s see.
The Sector Financial Balances (SFB) model is an accounting identity, and these are always true by definition alone. The SFB model says:
Domestic Private Balance + Domestic Government Balance + Foreign Balance = 0.
