SamuelRSmith said:
Because it allows you to buy more things than you should actually be able to afford, which, in the short run, will lead to greater consumption and, therefore, demand. Greater demand increases investment and productivity, which is exactly what is needed to pull us out of recession. The side effects are that we have to pay back more during the good times - but that's easier to afford. It's not just me saying this, btw, it's pretty much every single Government in the Western world. |
Assuming you had no debt and you weren't running a deficit before the recession ...
If you have a moderate or large debt, and you have a moderate or large deficit, and you try to "Stimulate" the economy through larger deficits all that is going to happen is you're going to see higher inflation and higher interest rates which will have as large (or larger) of an negative impact on the economy as the positive impact from an increase in spending.
