Tuesday, September 15, 2009

Do Deficits Matter

Today, Becker writes:
To the extent that the source of the rise in a deficit is increased government
spending, then whether that rise is justified depends on how socially valuable
are these government expenditures. By that I mean the social rates of return on
these expenditures, such as longer lives for the elderly, relative to the
interest cost of raising the required funds, and relative to the returns on
other investments in the economy.

So, on this principle, if you have a trillion dollars to spend, would you spend it on 5 years of war in Iraq or 10 years of universal health care?

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