Government spending crowds-out infrastructure

(Diane, Chief Economist, Grant Thornton, “A Fork in the Road ECONOMIC CURRENTS” August 10, 2018 pg online @ https://www.grantthornton.com/content/dam/grantthornton/website/assets/content-page-files/economic-analysis/economic-update/economic-update-aug-2018/economic-currents-aug-v3-1/economic-currents-aug-v3-1.pdf.coredownload.inline.pdf //um-ef)

The White House has said tariffs will increase revenues and lower the deficit. The difficulty with that statement is the impact tariffs have on the economy. Tariffs raise costs, dampen growth and, in the worst-case scenario, trigger a recession. Even if long-term rates do not rise, increased government spending will eventually crowd out other spending, notably investment in infrastructure by both the public and private sectors.