Let’s Escape From Spending Hell

America needs to take a good look at the methods and results Western governments have used to get over recessions. The data is in; and it is incontrovertible. Cutting spending works much better than increasing taxes and government spending.

 Alberto Alesina, a professor of economics at Harvard University and a group of co-workers have examined the efforts of 17 Western nations between 1978 and 2009 in their policy changes designed to alleviate recessions. They looked at cutting spending, raising spending, raising taxes, cutting taxes, and all kinds of combinations of these measures. They found that both spending cuts and raising taxes often cause an aggravation of economic recession. But…the recessions associated with spending cuts have caused mild, short-lived recession; and in a few cases, no recession at all was experienced. Tax increases have been associated with prolonged and deep recessions.

The Keynesian “multiplier effect,” which was proposed by John Maynard Keynes in 1931 posited that more public spending will revive a struggling economy. President Obama has bought into this aged theory more than any other President. His Keynesian economic policies have pushed federal spending up to 25% of gross domestic product; and the growth produced has been anemic. It is time we get off of that old and worn-out, theoretical program and quit all this spending.

This blog post is redacted from The Wall Street Journal of 14 March 2013, page A15.