I think this is somewhat contestable: Republicans in the US have denied support for programs that would alleviate some of the worst aspects of the economic impact citing âresponsible government spendingâ (source?)
The following is an interesting take from a Goldman Sachs economist:
As former Goldman Sachs chief economist, and hedge fund manager Gavyn Davies recently put it: âEven more notable has been the unanimity among macroeconomists that massive fiscal and monetary stimulus is the appropriate response to a âwartimeâ economic emergency. Almost no one seriously disputes that policy should be doing âwhatever it takesâ to overcome the shock from the virus. This agreement reflects a key conclusion from public finance theory: that higher government debt is the correct shock absorber for the private sector in the face of unpredictable, temporary economic crises. It avoids the distortions that would follow the big variations in marginal tax rates that would otherwise be needed to finance a surge in public spending over a short period.â So the public sector is there to bail out the private (capitalist) sector when it goes into âunpredictable, temporary crisisâ.
Davies goes on: âMost New Keynesian economists, including Paul Krugman and Lawrence Summers, believe high debt levels will not in themselves be a problem for advanced economies. They even suggest further rises in debt would be desirable, as that would help reverse the trend towards secular stagnation in Europe and the US.â A key reason for their optimism is that the annual cost of servicing the debt will be below the nominal growth rate in the economy and the central banks seem set to keep it there.
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