The notion that debt-financed government spending has a “low fiscal cost” is not only misleading, but also hides the fact that it has real economic costs, even when the interest rates are very low, a recent study says.
“There is no free lunch when it comes to debt-financed government spending. Even with record low interest rates, there are real costs imposed on the economy and Canadians,” said study co-author Bev Dahlby, a senior fellow with the Fraser Institute, in a press release on July 7.
The study, titled “The Fiscal Costs of Debt-Financed Government Spending,” is a review of fiscal policies made based on favouring debt-financed spending due to “very low interest rates on government debt over the past decades.”…