Rethinking government debt

Increasing debt can be a potent weapon against recession.

Rising government deficits and debts in advanced economies need to rise further. PHOTO: REUTERS

"It will cost us dearly," said US President Joe Biden when he announced earlier this month his proposed American Rescue Plan, which has a price tag of US$1.9 trillion (S$2.5 trillion).

This will come on the heels of the US$920 billion fiscal package passed by the US Congress last month, which in turn came on top of the US$2.2 trillion stimulus under the Cares Act passed last March, plus at least US$600 billion in other fiscal reliefs. Add it all up and it totals close to US$6 trillion, or about a quarter of US gross domestic product (GDP).

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