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Government Deficit

The Dynamic that shows that Government Deficits benefit the Private Sector

Hanns-Jürgen Hodann
When people talk about a government deficit, they forget that this is only one side of the ledger. On the other is a corresponding non-government SURPLUS. The money the government spends is not lost but shows up in the private sector as income. When one talks only of the deficit then one can understand that many think it should be reduced or even converted into a surplus, but reducing the government deficit reduces private sector income and a government surplus forces a deficit on the private sector with a potentially devastating effect on private sector wealth and economic activity.  Unless the economy is overheating, government deficits are usually healthy. For countries that run traditionally a trade deficit, such as the US they are necessary to maintain economic activity. Consider this fact: for almost all of past 40 years the US and the UK have run deficits without any harmful effects!
This video by professor Stephanie Kelton contains evidence that supports the modle.

https://www.youtube.com/watch?v=g6rlprwQB5E

Government Deficit Economy Private Sector Wealth

  • 1 year 5 months ago