Last updated: 17 july, 2009 - 12:43 GMT

'Borrowing now means inflation later'

John Maynard Keynes

John Maynard Keynes' views have influenced government policies around the globe

There is an immensely important debate about the consequences of governments spending because people and companies won't.

It is not a new argument, the British economist John Maynard Keynes argued that governments could spend their way out of recession.

Tax cuts

While Keynesians are in power now in Washington and London.

One sceptic is Arthur Laffer, an enormously influential economist who gave his name to the Laffer Curve.

His insight - or mistake, depending on your point of view -was to realise that just lowering tax rates might stimulate the economy.

Which would result in more total tax revenue for the government - it's the idea behind George W Bush's tax cuts.

He's also a strong believer that borrowing now means inflation tomorrow. Business Daily's Steve Evans asked him why.

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First broadcast on 14 July 2009


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