982, 1983 and 1984, are all examples of where government deficits can be beneficial.
The other half of the picture, deficits during periods of economic expansion, is not so cheerful. Government deficits during economic prosperity stand as a barrier to economic expan sion. During times of expansion, businesses seek money to expand and increase their productivity and profitability through invest ments in personnel, materials, and machines. This creates a conflict between government and private borrowing since both sides are trying to get a share of the limited supply of loanable funds. The government cannot function without the money, thus, the conflict results in higher interest rates and a lower rate of economic investment because the supply of money available for loans is not s elastic as the interest rates. Currently, the government is siphoning off more than 50 percent of the supply of private savings to finance the deficit and has helped to reduce the amount of money invested to 4.7 percent of the GNP as opposed to 6.7 percent in the 1970's.
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