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


 

Publication Date: January 2008

Publisher: Hoover Institution on War, Revolution, and Peace

Author(s): Dino Falaschetti

Research Area: Banking and finance; Economics

Keywords: Deficit; Economy

Type: Report

Coverage: United States

Abstract:

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.