The following quotation is from Bloomberg .Com and is in turn based on extracts from a paper by Michael Spence: As you can see by the brief bio I have attached he's no "lefty." Is the approach to budget deficits briefly outlined here more "Keynesian," more "Crowding Out" or more "Supply Side" in tone? Explain
Michael Spence
Michael Spence, a Nobel laureate in economics, is Professor of Economics at NYU's Stern School of Business, Distinguished Visiting Fellow at the Council on Foreign Relations, Senior Fellow at the Hoover Institution at Stanford University, Academic Board Chairman of the Asia Global Institute in Hong Kong, and Chair of the World Economic Forum Global Agenda Council on New Growth Models. He was the chairman of the independent Commission on Growth and Development, an international body that from 2006-2010 analyzed opportunities for global economic growth.
Many governments nowadays are accumulating debt in order to buttress public or private consumption. This approach, if overused, can amount to borrowing future demand; in that case, it is clearly unsustainable. But, if used as a transitional measure to help jump-start an economy or to provide a buffer from negative demand shocks, such efforts can be highly beneficial.... in an environment of low long-term interest rates and deficient short-term aggregate demand (which means there is little risk of crowding out the private sector), it is a mistake not to relax fiscal constraints for investment. In fact, the right kind of public investment would probably spur more private-sector investment. Identifying such investment is where today's debt debate should be.