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Useful summary of the debt debate by The Economist's Philip Coggan. @prospect_clark
While we are now challenging one mistaken belief – that government spending is constrained by the need to fund it with taxes and borrowing – we may be replacing it...
prospectmagazine.co.uk/magazine/does-…
Useful summary of the debt debate by The Economist's Philip Coggan. @prospect_clark
While we are now challenging one mistaken belief – that government spending is constrained by the need to fund it with taxes and borrowing – we may be replacing it...
prospectmagazine.co.uk/magazine/does-…
2/7
with another mistaken belief: that government spending is constrained by inflation.
In fact inflation isn't a constraint on government spending. It is one of the possible consequences of the real constraint, which is the impact of government spending on boosting the...
with another mistaken belief: that government spending is constrained by inflation.
In fact inflation isn't a constraint on government spending. It is one of the possible consequences of the real constraint, which is the impact of government spending on boosting the...
3/7
demand for goods and services relative to its impact on the supply. If government spending results in an increase in total production that is in line with or exceeds its impact on total demand, there is no constraint, inflation or otherwise.
demand for goods and services relative to its impact on the supply. If government spending results in an increase in total production that is in line with or exceeds its impact on total demand, there is no constraint, inflation or otherwise.
4/7
If it results in higher demand relative to production, then inflation is one of the many ways – other ways include financial repression, wage suppression, or “crowding out” – that supply and demand are brought back into balance, with some “hidden tax” that effectively...
If it results in higher demand relative to production, then inflation is one of the many ways – other ways include financial repression, wage suppression, or “crowding out” – that supply and demand are brought back into balance, with some “hidden tax” that effectively...
5/7
transfers purchasing power from households or businesses to the government.
An increase in total production can occur directly (e.g. government spending on needed infrastructure) or indirectly (e.g. social spending that creates incentives for businesses to increase...
transfers purchasing power from households or businesses to the government.
An increase in total production can occur directly (e.g. government spending on needed infrastructure) or indirectly (e.g. social spending that creates incentives for businesses to increase...
6/7
investment), but as long as there is no crowding out of investment, government spending that increases both supply and demand will always result in more growth and higher aggregate incomes.
investment), but as long as there is no crowding out of investment, government spending that increases both supply and demand will always result in more growth and higher aggregate incomes.
7/7
As for “crowding out”, we shouldn’t be too quick to dismiss the possibility, but it is only a problem in economies in which investment is constrained by scarce savings, something that hasn’t been true in the developed world for decades.
As for “crowding out”, we shouldn’t be too quick to dismiss the possibility, but it is only a problem in economies in which investment is constrained by scarce savings, something that hasn’t been true in the developed world for decades.
"But Yellen went a step further on Sunday, saying that it was important to offset the cost of the Biden administration’s spending plans in order to prevent America’s fiscal position from worsening."
ft.com/content/f8a154…
ft.com/content/f8a154…
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