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Is Deficit-Financed Growth Limited? Policies and Prospects in An Election Year

Dimitri Papadimitriou, Anwar Shaikh (), Claudio H. dos Santos and Gennaro Zezza

Economics Strategic Analysis Archive from Levy Economics Institute

Abstract: Wynne Godley, our Levy Institute colleague, has warned since 1999 that the falling personal saving and rising borrowing trends that had powered the US economic expansion were not sustainable. He also warned that when these trends were reversed, as has happened in other countries, the expansion would come to a halt unless there were major changes in fiscal policy. Not long ago, official circles insisted that monetary policy was the most desirable tool, and that fiscal deficits were not only unnecessary but also harmful(ERP, 2000, p.31-34; Greenspan, 2000). Some economists, notably Edmund Phelps of Columbia University, went so far as to suggest that the economic expansion was not caused by rising demand, but rather because growth had become ÔstructuralÕ (Financial Times, August 9, 2000).

Date: 2004-04
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