Fiscal Arithmetic for Government Debt, Deficits, and Economics Growth

December 3, 2010

Economic policy debate in the United States and other developed economies has been dominated by talk of lowering fiscal deficits through spending reductions.

Many argue that severe austerity is needed to reestablish fiscal sustainability, economic stability, and growth. The authors however, show that fiscal restraint is not conducive to economic growth out of the recession. The authors argue that spending is needed to spur growth and lower the deficit.

Authors: Laura de Carvalho, Christian Proaño and Lance Taylor
Download PDF