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When Deficits Make Sense: How Debt Helps to Discipline Public Spending

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Publication Date: January 2008

Publisher(s): Hoover Institution on War, Revolution, and Peace

Author(s): Dino Falaschetti

Series: Hoover Digest

Topic: Banking and finance (Public finance)
Economics (Economic policy, planning, and development)

Keywords: Deficit; Economy

Type: Report

Coverage: United States


Financial markets put a brake on ill-considered government projects, even when taxpayers don’t. This article uses examples of to illustrate the author's point that running deficits, not balancing budgets, can productively constrain governments by raising the price on unproductive spending while readily supporting public projects that strengthen economic performance.