Crowding Out Not Gonna Happen Soon

With unemployment hovering near 10% for nearly two years now, it should be obvious that the economy is no where near capacity.  Yet, many on Wall Street and in the talking-head TV shows continue to maintain that government borrowing is “crowding out” private investment (or going to soon).  Um, I don’t think so.  Crowding out would be seen in rising interest rates.  But a look at the data shows we’re still hard against the “zero bound”.  In other words, interest rates are still about as low as they can go.

US Government Short run interest rates near zero for 2008-2010