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View Diary: Ask a Keynesian: With U.S. Borrowing Capped, Won't More Pentagon Spending Destroy American Jobs? (5 comments)

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  •  Not necessarily.... (0+ / 0-)

    In theory, you should only be either borrowing new public debt, or taxing, when you need to destroy private sector jobs.  That is, when the economy is overheating and there are more jobs than workers available, creating inflationary pressure on wages.  Otherwise, new spending should basically be financed by new money from the Fed.  

    Now if the Fed is also politically constrained, and it may be right now, then you are right.  But really, they should be doing something like the trillion dollar coin that Krugman has discussed.  The Fed should be using any legal means within it's power right now to provide dollars to the economy, absorbing any new debt.

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