by Mark Thoma, University of Oregon (Department of Economics)

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The Need for Deficit Spending

Posted on June 25, 2009

As a follow up to the post Don't Nullify Fiscal Policy which was part of the Romer Roundtable on fiscal policy mistakes during the Great Depression, in particular the mistake made in 1937 of giving into pressure to balance the budget before the economy had recovered sufficiently causing an economy showing signs of recovery to fall back into depression, David Cay Johnston emails this explanation of the need for deficit spending after large negative shocks from his February 18, 2009 Johnston's Take column at Tax Notes:In the long run we need more savings and investment, but as Keynes famousl...

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budget , deficit , economy , tax