The fact that the interest rate is lower than the growth rate eliminates Ricardian neutrality

Ricardian neutrality says that if the government increases the fiscal deficit, the private sector will increase its savings rate since it will expect that the government at a later stage will have to conduct a restrictive fiscal policy to restore its fiscal solvency. The increase in private sector savings then cancels out the effect of the fiscal deficit on domestic demand. But this reasoning holds if interest rates are higher than growth: a fiscal solvency constraint that must be complied with then appears. But if, as is the situation today, interest rates are lower than growth, fiscal solvency is restored spontaneously in the future without a need to conduct a restrictive fiscal policy. There is therefore no reason why the savings rate should rise in response to the fiscal deficit, and we should therefore expect fiscal policy to be more effective when the interest rate is lower than the growth rate.