Abstract

Upper and Lower Limits to Public Debt Critical comment on Wolfgang Stützel’s statements

Stützel’s theses that increasing public borrowing does not lead to crowding out of private investors from the loans market and is a suitable means of reducing the indebtedness of firms is countered with the critical objection that these theses are not adequately substantiated by the theory. Stützel’s argumentation is based primarily on definitional identity of cycles, which must, ex post, always be satisfied. He largely neglects the explicit formulation of behaviour hypotheses which would be necessary for the causal conclusions he sets forth. Insofar as implicit behaviour hypotheses can be concluded in Stützel’s statements, they are either not very plausible (thesis 1) or may lead to opposite results (thesis 2). Stützel’s third thesis that the current amount of interest-bearing public debt in the Federal Republic of Germany lies beneath a lower limit while other future commitments of the public households, involving social transfers and subsidies, already lie above an upper limit has no substantiation in the theory and, in our view, can only be interpreted as the expression of a political opinion.