Phase 8 — Adversarial Red Team Review

The final phase stress‑tests each conditional pathway economically, politically and socially. It also highlights divergence between public narratives and underlying realities.

Gradual Primary Surpluses

• Economic attack: If r > g, even modest surpluses may not reduce the debt ratio. Growth may underperform expectations.
• Political attack: Sustained surpluses require bipartisan support; voters may reject prolonged austerity.
• Social attack: Cuts can hurt vulnerable groups and provoke unrest. Narratives may oversimplify austerity.

Managed Inflation & Financial Repression

• Economic attack: Inflation can become entrenched, prompting wage‑price spirals and higher interest rates.
• Political attack: Savers and retirees resist erosion of their wealth; central bank independence may be challenged.
• Social attack: Inflation erodes trust and can fuel populist narratives that misallocate blame.

Perpetual Rollover under Safe‑Asset Demand

• Economic attack: Safe‑asset demand may weaken if alternatives emerge; manufacturing decline can hurt growth.
• Political attack: Persistent trade deficits may generate backlash from regions hurt by deindustrialization; tariffs could reduce foreign demand for Treasuries【518734610474351†L203-L208】.
• Social attack: Benefits accrue to asset holders and government finances, while workers may feel left behind.

Structural Growth‑First Strategy

• Economic attack: Public investment may crowd out private investment if misallocated; returns are uncertain.
• Political attack: Long gestation periods reduce political incentives; projects can be captured by interest groups.
• Social attack: Unequal distribution of benefits can widen inequality and provoke backlash.

Debt Restructuring or Repudiation

• Economic attack: Default would destroy safe‑asset status and trigger global financial turmoil.
• Political attack: Repudiation could violate the U.S. Constitution and provoke crises.
• Social attack: Pension funds and savers would suffer losses; trust in institutions would collapse.

Unresolved Questions

Several uncertainties remain:

• Interest‑rate–growth differential: Future values of r − g are uncertain and depend on productivity, demographics and geopolitical shocks.
• Distributional trade‑offs: Precise impacts depend on complex interactions among taxes, transfers, asset holdings and labour markets. Data limitations and model sensitivity hinder precise projections.
• Safe‑asset demand: While Treasuries remain dominant, alternative safe assets or geopolitical shifts could alter demand.
• Political feasibility: Long‑term fiscal strategies require durable coalitions; U.S. politics is highly polarized.
• Future shocks: Climate change, pandemics and wars could alter debt trajectories, necessitating further borrowing.

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