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Don't expect stimulus package to cause rise in interest rates

A Look at the Record

As Congress presses forward with an economic stimulus package, questions are still being asked about whether it would raise interest rates, thereby negating any stimulus. There are legitimate concerns that can be raised about whether the bill recently passed by the House will do much to increase growth in the short run, but its impact on interest rates is not one of them.

The idea is that lower revenues resulting from tax cuts will lower the budget surplus or push it into deficit. Whether or not an actual deficit emerges is irrelevant. Since surpluses are, theoretically, additions to national saving, any decline in the surplus should have exactly the same effect on ...

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