| HN Mirror

There's a subtlety here, though. It should be obvious that too much deficit spending has negative second order effects overwhelming the first order ones. (An extreme form of this: imagine having the government trying to spend quintillions each year -- that's clearly not going to work without some massive inflation.)

It is not at all self-evident that the same is true for all deficit spending, even on an infinite time horizon.

Consider, for example, that central banks typically aim to have a ~2% rate of inflation in the long run. Given that, why would it be harmful to forever have a level of deficit spending that keeps the real value of the government debt constant in the long run? Or, ignoring inflation but assuming economic growth, that keeps the ratio of government debt to GDP constant in the long run? Why would that be harmful?

(Note: If the government was able to successfully run a balanced budget indefinitely[0], both of those quantities would approach 0 in the limit; some long-run government deficit spending is necessary to keep them constant.)

And yes: the stronger claim, which I also support, is that deficit spending is an important ingredient for our prosperity, because it acts as a sort of "prime mover" for pushing up society's overall level of wealth. (As usual, there's a balance to this. Too much of a good thing etc.)

[0] There's a lot of historical evidence which suggests that this is impossible anyway because it becomes self-defeating. Balanced budgets ultimately cause or at least contribute to recessions, which cause a budget deficit via reduced tax income and increased social services spending.