Post
Topic
Board Economics
Re: US National Debt / Deficit - How does it end?
by
RoadTrain
on 20/09/2014, 18:31:10 UTC
Wrong, government borrowing doesn't crowd out private investment per se. Government borrowing is a vertical transaction, while private investment is horizontal.

There's an article explaining this fallacy in simple words.
http://econrevival.blogspot.ru/2013/10/crowding-out-and-its-relation-to.html

The blog does have some disclaimers.

Having said all this, is it possible that in some cases government spending influences business incentives to a degree that might cause less private investment. 

Of course it is. Probably. And I noted it by using adverb per se.

It's a government's responsibility to spend wisely, to try to achieve maximum efficiency in resource utilization. But that's not what most governments do.