Government borrowing can quietly starve private investment

When a government ramps up borrowing to fund spending, it competes with businesses for the same pool of loanable funds, which can push up interest rates. Firms that would have borrowed to build factories or hire staff now find credit more expensive, so some private investment never happens. Economists dispute how large this 'crowding out' is, but it's a core reason fiscal stimulus doesn't always deliver the full boost its backers promise.

— N. Gregory Mankiw, Macroeconomics — Chapter on fiscal policy and crowding out
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