Authors - Pavel E. Zhukov Abstract - The paper analyzes the problem of growth of public debt in developed countries with the compound interest approach, initially proposed with the Sargent-Wallace model. It is concluded that since 2002, when central banks began to apply the New Keynesian Model in monetary policy, governments have been widely using deficit financing of fiscal expenditures in order to stimulate economic growth. Based on the experience of 2002-2025, the parameters of the exponential growth of the debt-to-GDP ratio and the dangerous values of the budget deficit are assessed. General conclusions are made about the ineffectiveness of the dominant model of fiscal policy and the need to revise it, as well as the need to consider the growth of the money supply in monetary policy. General recommendations proposed. First: it is obvious that the United States and Japan have to introduce the VAT and do not increase customs duties. Second: In order to accelerate economic growth, it is necessary to shift fiscal policy priorities from the development of infrastructure and social programs to R&D, which will increase labor productivity. Third: Generally, all the social programs have to be audited. Specific for the United States, health insurance reform and limiting the growth of the budget deficit due to the Medicare and Medicaid programs are urgently needed. Fourth: Perhaps "national" companies with a high degree of localization should be stimulated with tax incentives for corporate income tax and shareholder income tax.
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