The long-run dynamics of public deﬁcits and debt are modeled, assuming that public debt competes with capital for limited private savings. The interest costs of the debt are endogenously determined inthis market, and the deﬁcit in other budget transactions is a constant fraction of Gross National Product. Simulations with parameter values suggested by recent United States experience show the likelihood of unstable paths, along which debt grows faster than GNP indeﬁnitely.
Tobin, James, "The Monetary-Fiscal Mix: Long-Run Implications" (1986). Cowles Foundation Discussion Papers. 1021.