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Is Deficit-Financed Growth Limited? Policies and Prospects in An Election Year

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  • Dimitri B. Papadimitriou
  • Anwar Shaikh
  • Claudio H. dos Santos
  • Gennaro Zezza

Abstract

Wynne Godley, our Levy Institute colleague, has warned since 1999 that the falling personal saving and rising borrowing trends that had powered the US economic expansion were not sustainable. He also warned that when these trends were reversed, as has happened in other countries, the expansion would come to a halt unless there were major changes in fiscal policy. Not long ago, official circles insisted that monetary policy was the most desirable tool, and that fiscal deficits were not only unnecessary but also harmful(ERP, 2000, p.31-34; Greenspan, 2000). Some economists, notably Edmund Phelps of Columbia University, went so far as to suggest that the economic expansion was not caused by rising demand, but rather because growth had become ÔstructuralÕ (Financial Times, August 9, 2000).

Suggested Citation

  • Dimitri B. Papadimitriou & Anwar Shaikh & Claudio H. dos Santos & Gennaro Zezza, 2004. "Is Deficit-Financed Growth Limited? Policies and Prospects in An Election Year," Economics Strategic Analysis Archive 04-4, Levy Economics Institute.
    • Handle: RePEc:lev:levysa:04-4
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    File URL: http://www.levyinstitute.org/pubs/stratan-apr-04.pdf
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    References listed on IDEAS

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    1. Dimitri B. Papadimitriou & Anwar Shaikh & Claudio H. dos Santos & Gennaro Zezza, 2002. "Is Personal Debt Sustainable?," Economics Strategic Analysis Archive 02-11, Levy Economics Institute.
    2. Dimitri B. Papadimitriou & L. Randall Wray, "undated". "What to Do with the Surplus: Fiscal Policy and the Coming Recession," Economics Policy Note Archive 98-6, Levy Economics Institute.
    3. Wynne Godley, 1999. "Seven Unsustainable Processes: Medium-Term Prospects and Policies for the United States and the World," Economics Strategic Analysis Archive 99-10, Levy Economics Institute.
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    Cited by:

    1. Antonio Carlos Macedo e Silva & Cláudio Hamílton dos Santos, 2008. "Peering over the edge of the short period? The Keynesian Roots of Stock-Flow Consistent Macroeconomic Models," Anais do XXXVI Encontro Nacional de Economia [Proceedings of the 36th Brazilian Economics Meeting] 200807151456380, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    2. Dimitri B. Papadimitriou & Anwar M. Shaikh & Claudio H. Dos Santos & Gennaro Zezza, 2005. "How Fragile is the U.S. Economy?," Economics Strategic Analysis Archive sa_mar_05, Levy Economics Institute.

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