Assessing the Counter-cyclical Macro Policies of the Great Recession

There are at least two ways of proceeding. One could repeat the following mantra endlessly:

[T]he government taxes or borrows the resources used to build infrastructure projects. Government spending crowds resources out from the rest of the economy. More federal spending comes at the expense of a smaller private sector.

These factors explain why the 2009 stimulus failed. So did Japan’s decade-long attempt to stimulate its economy through infrastructure projects. The Japanese wound up with massive debt, superhighways in underpopulated rural districts—and an anemic economy.

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