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Is Deficit Spending Feasible in the Long Run?
Journal of Contextual Economics – Schmollers Jahrbuch, Vol. 103 (1983), Iss. 5 : pp. 409–418
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Carlberg, Michael
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Abstract
Government raises loans and levies an income tax to finance both purchases of goods and services and interest payments on public debt. Government purchases exceed tax revenue. The rate of interest corresponds to the marginal product of private capital. Households save a fixed share of national income and debt income, net after tax respectively. A good deal of private savings is absorbed by public borrowing, the remainder being left for private investment. Does a steady state of growth exist? Or will public debt explode? Theoretical analysis shows that as a rule deficit spending is not feasible in the long run