Crowding out effect on growth due to public spending

When the economy is operating near capacity, government borrowing to finance an increase in the deficit causes interest rates to rise. Higher interest rates reduce or “crowd out” private investment, and this reduces growth.


https://www.economicshelp.org/blog/1013/economics/crowding-out/

https://www.investopedia.com/terms/c/crowdingouteffect.asp