Combining these two major effects, one can say that the appropriate longer-term goal for fiscal policy should be increased savings, investment, and output through an appropriately low debt-to-GDP ratio. A decline in the debt-to-GDP ratio can have additional favourable effects.
First, to the extent that a lower debt-service burden leads to lower taxes, rather than higher expenditures, it leads to a reduction 4  BIS Review 28/2001  in the usual distortionary effects of taxes. Second, to the extent that it reduces the effect of a given change in interest rates on the government's balance, it makes fiscal planning much easier.