Prereleasing a chapter in its biannual Economic Outlook, the Organization for Economic Cooperation and Development (OECD) said Thursday governments needed to get over their fixation with debt levels, and ramp up public spending to increase the pace of economic activity.
The message offered support to a growing number of governments among the OECD’s 35 member countries which have been looking to fire up growth by fresh borrowing and moderate tax cuts.
After years of low growth in most developed economies, governments could scarcely afford to ignore the opportunity to finance growth-boosting investments at a time of record-low interest rates, the report said.
Don’t save for the sake of saving
The OECD added that letting deficits rise to finance investment and ease tax burdens could raise medium-term economic output by more than it increased debt, leading to a medium-term decrease in public debt-to-GDP ratios.
It estimated that increasing budget deficits by half a percent of GDP …