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Deficit Hysteria Redux? Why We Should Stop Worrying About U.S. Government Deficits

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  • Yeva Nersisyan
  • L. Randall Wray

Abstract

This brief by Yeva Nersisyan and Senior Scholar L. Randall Wray argues that deficits do not burden future generations with debt, nor do they crowd out private spending. The authors base their conclusions on the premise that a sovereign nation with its own currency cannot become insolvent, and that government financing is unlike that of a household or firm. Moreover, they observe that automatic stabilizers, not government bailouts and the stimulus package, have prevented the U.S. economic contraction from devolving into another Great Depression. The authors dispense with unsubstantiated concerns about deficits and debts, noting that they mask the real issue: the unwillingness of deficit hawks to allow government to work for the good of the people.

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Paper provided by Levy Economics Institute in its series Economics Public Policy Brief Archive with number ppb_111.

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Date of creation: May 2010
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Handle: RePEc:lev:levppb:ppb_111

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  1. Reinhart, Carmen M. & Rogoff, Kenneth S., 2010. "Growth in a Time of Debt," Scholarly Articles 11129154, Harvard University Department of Economics.
  2. L. Randall Wray, 2005. "Social Security's 70th Anniversary: Surviving 20 Years of Reform," Economics Policy Note Archive, Levy Economics Institute 05-6, Levy Economics Institute.
  3. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "This Time Is Different: Eight Centuries of Financial Folly," Economics Books, Princeton University Press, Princeton University Press, edition 1, volume 1, number 8973.
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Cited by:
  1. Soon Ryoo & Peter Skott, 2013. "Public debt and full employment in a stock-flow consistent model of a corporate economy," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., M.E. Sharpe, Inc., vol. 35(4), pages 511-528, July.

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