“The terms on which the U.S. government can borrow now are exceptionally advantageous. And because of high unemployment the benefits of boosting government purchases and cutting taxes right now are exceptionally large…[R]ight now, as best we can tell, an increase in federal spending or a cut in taxes will produce (in the short run) no increase in interest rates and hence no crowding-out of productivity — increasing private investment. Indeed, government spending that adds to firms’ current cash flow may well boost private investment and so leave us, dollar for dollar, richer after the effect of the stimulus ebbs.“
As the recent wave of deficit hysteria hits the G20, prompting a frightening and idiotic retreat back into Hooverism (As Krugman put it: “Utter folly posing as wisdom“), economist Brad DeLong explains once more the the case for deficit spending during a recession. THIS IS NOT ROCKET SCIENCE, people (which is why 3/4ths of voters already get it.)
