Quote:
Originally Posted by aceventura3
The only net profit occurs when the investment made by government gives a higher return than if that investment was made by the private sector. For example our investment in the interstate highway system was most likely a profitable investment by government.
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Yeah are ignoring the time component of it all. First, the issue of private vs public spending only really matters when one crowds out the other. We are having a major shortage of investment now even at 0% interest rates. Hence, there is no crowding out at the present moment.
Now, of course, debt today has to be repaid tomorrow. But one dollar today is not worth the same as one dollar tomorrow. In a growing market, where interest rates are high, one dollar today means several dollars of debt tomorrow, so deficits hurt the economy by taking out several dollars out of circulation in the future.
But with 0% interest rates and a tanking economy, it is much preferable to spend it today, because the debt will you need to repay tomorrow is worth significantly less.
So as long as that spending generates SOME stimulus, you are talking about about repaying that debt with just a portion of the investment.