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Vol. 73, No. 2
Posted 1991-03-01

Should Government Spending on Capital Goods be Raised?

by John A. Tatom

Tatom notes that the size of the public capital stock is important for broader reasons than its effect on private sector output. Thus, he says, the case for raising or lowering public capital spending does not rest only upon its effects on private sector production. The author explains that, while there has been a slowing in the growth of the public capital stock, this slowdown was consistent with changing demographic and relative price trends that influence the public’s desired stock of government-held assets. Tatom also explains that the slowdown in public capital formation has taken place primarily at the state and local government level. According to Tatom, the case for a sharp rise in public capital spending is not supported by past trends.

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