Discuss how might large federal deficits affect future economic growth?

The U.S. governments budget has generally been in deficit since the 1960s, despite many attempts to legislate balanced budgets. Defining the government’s position appropriately raises a number of difficult issues, such as using real verses nominal budgets and cash verses capital accounting. A more important issue is the short-run verses long-run debt of the U.S. government. Adding up the total net present value of the governments promised taxes and spending shows that the U.S. government faces a major fiscal imbalance.

Discuss how might large federal deficits affect future economic growth? How would your answer change if foreign confidence in the ability of the United States to repay its debts erodes? Suggest one way in which generational imbalances might be overstated?