Veronique de Rugy points out a study just released by economists at the European Central Bank:
Basically, an increase in government spending (whether financed by taxes or by borrowing) reduces economic growth. This is consistent with a paper from a few years ago by Harvard Business School’s Lauren Cohen, Joshua Coval, and Christopher Malloy. To their surprise, those authors found that federal spending in states caused local businesses to cut back rather than grow.
But … but … what about the multiplier effect of government stimulus spending?