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Fiscal Spending May Be in Vogue, But It Still Has a Dark Side

Debt sustainability will look different if interest rates rise
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Photographer: Justin Ide/Bloomberg
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Spending to boost growth is back in style.

President-elect Donald Trump has pledged massive infrastructure investment in his quest to "make America great again." Should that plan pass Congress, it will add the U.S. to a list of nations — from Japan to Canada — where elected officials are trying to spur growth through government investment. 

Such outlays could ramp up risk if they add to national debt, a new analysis from Brussels-based Bruegel shows. The paper leads off our research wrap this week, which also includes a summary of Wall Street analyses of Trump's plans for the economy and research on how acquisitions by multinationals affect wages. Check this column every Tuesday for a summary of relevant or interesting economic research out within the last week. 

Elected officials are thinking about loosening the purse strings in the U.S. and the U.K., and the European Central Bank has been pleading for some fiscal help. Bruegel has a warning for potential spenders.