Government spending is essential for economic growth from "summary" of The Deficit Myth by Stephanie Kelton
The idea that government spending is essential for economic growth may seem counterintuitive to some. After all, we are often told that the government needs to tighten its belt and reduce its spending in order to stimulate the economy. But this perspective overlooks a crucial point – when the government spends money, it creates income for someone else. This, in turn, enables that person to spend money, which then creates income for another person, and so on. This chain reaction is what drives economic growth. In her book, Stephanie Kelton explains that government spending is not like a household budget. Unlike a household, the government can never run out of money because it is the issuer of the currency. This means that the government can always afford to spend money into the economy, regardless of its current revenue. In fact, Kelton argues that government deficits are not inherently bad, as they can actually help to boost economic growth by injecting more money into the economy. Kelton challenges the conventional wisdom that deficits are always a sign of fiscal irresponsibility. She argues that deficits can be a powerful tool for achieving full employment and promoting economic stability. By increasing government spending during times of economic downturn, the government can create jobs and stimulate demand, which in turn leads to increased economic activity and growth. Furthermore, Kelton emphasizes that the real limit on government spending is not the deficit, but rather the availability of real resources such as labor, materials, and technology. As long as there are unused resources in the economy, the government can continue to spend money without causing inflation. In fact, Kelton argues that inflation is a much more pressing concern than government deficits, as it can erode the purchasing power of the currency and harm the economy.- Kelton's argument is a powerful reminder that government spending can be a force for good in the economy. By understanding the role that deficits play in driving economic growth, we can begin to rethink our approach to fiscal policy and embrace a new paradigm that prioritizes full employment and shared prosperity.
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