Stephanie Kelton, in her new book The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy, demonstrates that concerns about public debt overhang are ill-founded. The result is slower GDP growth and stagnation in worker’s wages and salaries. The increased taxes will lower consumption spending of households and investment spending of businesses. With debt-to-GDP ratios so high, mainstream economists warn there will be a debt overhang post-pandemic, which they proclaim will force a curtailment of public spending in the future and an increase in taxes. The IMF anticipates the average debt-to-GDP ratios in advanced economies will rise above 120 per cent. Japan’s public debt to GDP ratio is expected to grow above 250 per cent. The United States and the United Kingdom are projected to have public debt levels soar above 100 per cent of gross domestic product (GDP). Massive increases in government spending have offered relief to households and businesses, but according to many politicians and economists, this government spending has generated ‘national debt dilemmas.’ Countries across the globe have shut down their economies in an effort to combat COVID-19.
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