Getting Our Priorities Right: What Does Justice Require That We Do? Part 2
The fear of public debt asareason for opposing deficit spending was perhaps first expressed by the classical economists. Because government did not produce goods, first Adam Smith, then David Hume, then Jean-Baptiste Say, and finally J. S. Mill argued that government expenditures were consumptive rather than productive; only private expenditures could be productive.1 All government spending (deficit or otherwise) was thereforeadeadweight loss for the economy. (They did concede, however, that some things that government did were “useful,’ although not productive). Anything likely to increase government spending (like borrowing) was therefore something to be avoided.2 But even more importantly, they feared that government borrowing would encourage war, for it meant war could be undertaken without paying for it out of current funds. They therefore believed that discouraging government borrowing was an important way of keeping such adventures toaminimum.3 Indeed, the latter concern was probably what was actually driving their views, for during their time deficit spending was generally undertaken primarily for purposes of funding war.4
KeywordsEuropean Union Monetary Policy Real Wage Full Employment Great Recession
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