Abstract
Classical principles of public debt limited debt financing to non-recurrent, extraordinary or temporary demands. Keynesian macroeconomics, viewing budget deficits as the only means of financing demand-increasing deficits during depressions, overlooked the exchange between government and lenders in debt-financed public expenditure. In the post-Keynesian 1970s and 1980s, governments explicitly used debt to finance ordinary public consumption, including transfers, which was equivalent to a destruction in national capital value and raised the prospect of default. Fiscal responsibility demands that the classical principles of public debt must eventually return to general acceptance.
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Buchanan, J.M. (2018). Public Debt. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95189-5_1883
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DOI: https://doi.org/10.1057/978-1-349-95189-5_1883
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