crowding out

crowding out

The borrowing of large amounts of money by the federal governmenta process that soaks up lendable funds, drives up interest rates, and eliminates from the credit markets many private firms wishing to borrow money from those markets. The government is able to crowd out private borrowers because its credit rating is so high and because it is willing to pay the interest rate demanded by the market. Small firms and companies with poor credit ratings are most adversely affected by crowding out.