Deficit spending, tax increase, and increasing productionand employment (note)

赤字支出・増税・生産と雇用の増加 (研究ノート)

Deficit spending, tax increase, and increasing productionand employment (note)

Creators Tsukada Hiroto

Ordinary Keynesian spending policy means government's deficit spending for public goods. But there is an argument that recent accumulation of government debt as in Japan or some other developed countries makes deficit spending difficult and it could even cause disastrous financial problems such as in Greece or in Spain. However, if we can put two new factors into deficit spending policy, namely tax iocrease right after deficit spending and spending for private goods. we will be able to open a new possibility of more government spending and therefore increase aggregate demand. But this is a tbeoretical possibility and if we want to put it into practice, we need a new political consensus for this policy. To know the probability ov such consensus we need further study on people's willingness to accept a new income inequality which results from this policy.

[ISSN]0513-1758

[NCID]AN00243258