Government

Cut Government Spending to Grow the Economy!

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Over at National Review's The Corner, Reason columnist and Mercatus economist Veronique de Rugy points to more work from Alberto Alesina, Carlo Favero, and Francesco Giavazzi about the relative merits of cutting spending versus raising taxes as a means of reducing debt-to-GDP ratios. Alesina, Favero, and Giavazzi write:

Fiscal adjustments based upon spending cuts are much less costly in terms of output losses than tax based ones. In particular, spending-based adjustments have been associated with mild and short-lived recessions, in many cases with no recession at all.Instead, tax-based adjustments have been followed but prolonged and deep recessions. 

De Rugy comments:

Another interesting finding in the Alesina/Giaviani paper is the correlation between spending cuts and business confidence. They find that "business confidence (unlike consumer confidence) picks up immediately after an expenditure-based adjustments." They are going to look more into this question in order to determine whether there is a direct causation or simply an interesting correlation.

Why? Because businesses seem to respond to the idea that the government is getting its house in order, which means less volatility in the political arena, less threat of new taxes (hard to estimate) and new regulations. Reducing regime uncertainty is something that governments can always do regardless of the business cycle or macroeconomic trends.

Surely even the Obama administration's most ardent supporters must be asking themselves whether constant interventions into the economy may have prolonged the recovery rather than hastened it.

Related: How Regime Uncertainty is Killing Businesses.

NEXT: Stockton Leads CA's Municipal Bankruptcy Rush

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  1. I say, why don’t we cut spending?

    1. +1 monocle adjustment

    2. But, but, GDP might decrease!

      1. The problem is that “G” in the formula.

        1. “G” is really only “T” (Taxes) which is subtracted from “C”

    3. Jolly good! Jolly, jolly good.

      What awful people.

  2. A penny saved is a penny earned.

  3. A penny saved…

    1. Is not spent on needed shovel ready infrastructure projects.

  4. Obama supporters don’t ask themselves ANYTHING from all I can see.

    1. Sure they do. Who’s the evil Rethuglican candidate? It’s so I know who to autonomically sneer at.

  5. Surely even the Obama administration’s most ardent supporters must be asking themselves whether constant interventions into the economy may have prolonged the recovery rather than hastened it.

    I’m not seeing much evidence of this. One of our commenters, I forget which, pointed out the double standard:

    “The stimulus saved the economy! Without it, we’d be at 15% unemployment right now!”

    “The only reason the stimulus didn’t work is because it wasn’t big enough!!”

    Another commenter pointed out that liberals don’t have any problem with trickle-down spending theory–as long as it’s the government rather than rich people doing the trickling. They might rail against capitalism, but have no problem with the Fed continuing to keep interest rates at rock-bottom levels while encouraging the expansion of “credit”(read: debt) as opposed to actual capital.

    They’ve never bothered to determine whether the limits of human scale are preventing what we could determine to be an actual “recovery.” The constant refrain is, “Well, if we just get Top. Men. in charge, and spend even more money, things will just work themselves out!!”

    1. …and that’s why modern American “liberalism” or “progressivism” seems so remarkably childish, to an observer with some critical thinking skills and the willingness to back away for a moment to look…

    2. Another commenter pointed out that liberals don’t have any problem with trickle-down spending theory–as long as it’s the government rather than rich people doing the trickling.

      What is this supposed to mean? The whole criticism of trickle-down is that the trickle-down never happens. It just concentrates wealth at the top. Government spending puts money directly out there. For the millionth time, your moral preoccupations do not necessarily align with good policy.

      The idea is very simple to understand: the problem causing high unemployment and high government deficits is a lack of aggregate demand (not enough people have enough money to spend to generate a healthy economy). One major reason for this is because trickle-down didn’t work as advertised (though it certainly worked as intended).

      1. Government spending puts money directly out there.

        No, it puts debt and an ever-increasing federal budget directly out there.

        For the millionth time, your moral preoccupations do not necessarily align with good policy.

        For the millionth time, I don’t give a flying fuck what you consider “moral.” And considering that we’ve had over 100 years of ever-expanding government spending (in case I need to remind you, in 1960 the cost of government was $760 billion inflation-adjusted), with $16 trillion in debt to show for it, you’re the last one to be bitching about government policy.

        The idea is very simple to understand: the problem causing high unemployment and high government deficits is a lack of aggregate demand

        Bullshit. The problem is too much debt in the system–not just the government, but the consumer level as well–and a government bureaucratic apparatus that is far out of proportion to society’s ability to support it.

        There are currently 115 million full-time workers supporting about 110 million Medicare/SS recipients, taking out far more in benefits than they paid in during their lifetime. In what world is this sustainable?

        http://www.oftwominds.com/blog…..e5-12.html

        This isn’t politics, dumbass, this is basic mathematics, something you’ve shown yourself incompetent at time after time after time.

        1. We have had consistent 2-3% growth recently with the largest deficits in history.

          Why shouldn’t growth be sharply negative like in late 2008?

          1. We have had consistent 2-3% growth recently with the largest deficits in history.

            Yeah, with 8-12% in deficit spending.

            Take that out and the “real” GDP is a lot worse. The “growth” you tout is a mirage.

          2. Re: Palin’s Buttwipe,

            We have had consistent 2-3% growth recently with the largest deficits in history.

            We’re actually in negative growth, shrike.

            Look at this report on scrap metal prices. Scrap metal demand correlates with ACTUAL economic growth, and it has been on a donward slope since 2011. We’re in a negative-growth recession right now.

            http://twitpic.com/abugye

            1. We are in an economy damaged by a severe financial crisis unseen since 1929.

              When future economists write texts 2008 = 1929.

              They worsened theirs then with bank failures and hiking interest rates (thus making Bernanke apologize to Milton Friedman).

              1. Palin’s Buttplug| 8.27.12 @ 7:09PM |#
                ..”When future economists write texts 2008 = 1929.”…

                Hyperbole, thy name be shriek.

              2. So why aren’t we at 5.6% unemployment and 4% growth, like we were told we’d be if we went along with the Obama plan?

                1. Because the recession was worse than anticipated, and we didn’t actually pass Obama’s plan.

                  1. and we didn’t actually pass Obama’s plan.

                    ummm he controlled both Congresses and the white house….

                    What the fuck was the problem?

                    Nice try joe.

                    1. You need 60 votes to break a filibuster in the senate. Obama never had it.

                    2. You need 60 votes to break a filibuster in the senate. Obama never had it.

                      Excuses are what parents make for children who don’t live up to expectations.

                    3. You are stupid.

                    4. You are stupid.

                      I’m Copernicus, Descartes, and Feynman combined compared to you.

                    5. You need 60 votes to break a filibuster in the senate. Obama never had it.

                      The stimulus passed with the votes of three Republicans. It wasn’t filibustered.

                  2. Because the recession was worse than anticipated, and we didn’t actually pass Obama’s plan.

                    So, even given all the data the massive appart of the federal government could muster and the top minds the Left could put forth…they got it completely wrong?

                    And they did pass Obama’s plan, every little bit of it. And then, a month later, they spent another $411 billion at the behest of the looter constituency he panders to.

                    And, by their own measure, what they did made things worse.

                  3. Because the recession was worse than anticipated,

                    This is the biggest laugher of the night. Anyone who’s watched domestic economic policy the last 30+ years could see a credit bubble being blown, with the housing market, and knew that it was a matter of if, not when, the crash would come.

                    I didn’t buy a house and whittled my debts down to nothing for this very reason–because I saw a huge bubble popping with nothing substantive to take its place in the credit expansion game (Bernanke’s tried with multiple rounds of QE and huge purchases of government debt, but he’s failed). When the drop came, I was sitting pretty even after being unemployed for 2.5 months in early 2008, while a lot of other people were crying the blues.

                    What happened the last decade is the same thing that happened in any kind of artificial credit expansion–people fall into the “bigger fool” theory of economics, accumulating debt in the hopes they can slough it off on someone else before the bubble pops. And it wasn’t hard to see it happening again.

                  4. The Derider| 8.27.12 @ 8:38PM |#
                    “Because the recession was worse than anticipated, and we didn’t actually pass Obama’s plan.”

                    See, if Communism actully got a try once, well, you know, really REAL Communism, cause nobody’s really, really tried it, well, uh….
                    Uh, well see no one has tried it. See, man?

            2. Lolin’ at “Scrap metal demand correlates with ACTUAL economic growth”

              Who knew recycling was so important?

              1. The Derider| 8.27.12 @ 8:45PM |#
                “Lolin’ at “Scrap metal demand correlates with ACTUAL economic growth”
                Who knew recycling was so important?”

                Who knew you were so stupid as to not recognize a market, even if that market is forced by the government?
                Think there isn’t a market in cutting your tax bill, idiot?

          3. We have had consistent 2-3% growth

            And inflation is above that.

            That is not growth. That is printing money and throwing it out of helicopters.

            1. No, inflation isn’t above 2-3%.

              1. yes it is.

                If the methods used to measure inflation in 1979 then inflation today would be measured well above 5%.

        2. I agree that math can be an effective tool in analyzing the economy. Which economists suggest that our current recession is due to a combination of consumer and government debt?

          1. Pretty much all of them who actually specialize at looking at it.

            Try Carmen Reinhart and Kenneth Rogoff to start.

            1. The Reinhart article I looked at first about public debt overhangs was discussing low, sustained economic drag from public debt in the 1% range– not a cataclysm like we saw in this recession. Can you be more specific? I’m really not trying to be a jerk– I just want to read the other side of this argument.

              1. sustained economic drag from public debt in the 1% range– not a cataclysm like we saw in this recession.

                1% growth over 4 years is 560 billion…that is without compounding. 560 billion is 11 million 50,000 a year jobs and at income tax of say 20% is 112 billion dollars a year in revenues that your precious government is not getting.

                Plus we would not have spent the 4 trillion….which by the way we are paying interest on.

                Of course the 1% is only median estimate…average estimate is above that…plus we are at 107% not 90% debt /GDP ratio….so the number is above 1% GDP loss.

                More then 560 billion, more then 11 million jobs more then 112 billion a year in lost revenues.

                If we had not lost all of that Obama would be above 60% approval rating and we would have 4% unemployment.

                OBAMA Keynesian failed miserably and the economics of of how he failed are easy to prove.

          2. Try Carmen Reinhart and Kenneth Rogoff to start.

            Better yet, tell him to shove his appeal to authority up his ass.

            1. Make sure to post this in every thread about Bastiat, Coase, or Hayek.

              1. If you have a counter to the data above, shithead, feel free to post it.

                1. I did so lower in the thread.

                  1. I did so lower in the thread.

                    You had an argument of semantics, but no data. Try again.

      2. What is this supposed to mean? The whole criticism of trickle-down is that the trickle-down never happens. It just concentrates wealth at the top.

        And your contention is that redistributionist programs create wealth in the lower income brackets? Or does that money just get spent?

        1. Trickle down from individuals goes to people who produce goods and services. From govt it goes to cronies, slackers, and parasites.

          1. What you tax you get less of, what you subsidize you get more of.

            So we tax industry and production, subsidize sloth and idleness and are shocked at what happens.

      3. The whole criticism of trickle-down is that the trickle-down never happens.

        Yeah cuz everyone who is not rich live barefoot in dirt floor shacks and burn animal dung for heat.

        You are an idiot Tony.

      4. I’m sorry, I didn’t realize that rich people were living high on the hog while poor and middle class people have slipped back into living like it’s the 30’s again.

  6. Oh is the Koch house economist here to tell us, with the aid of bullshit, how the Koch policy platform is what is best for the country?

    1. T o n y| 8.27.12 @ 6:19PM |#
      “Oh is the Koch house economist here to tell us, with the aid of bullshit, how the Koch policy platform is what is best for the country?”

      Oh, is the ignorant shithead here to spread lies, ad homs, misdirection and so forth?Why, yes, shithead is here!

    2. That’s amazing…I didn’t even see David Axelrod’s lips move!

  7. Re: Tony,

    It just concentrates wealth at the top.

    World, meet again the nitwit that believes wealth = money.

    Government spending puts money directly out there.

    Yes, out here:
    ||
    ||
    ||
    ||
    \/
    Trash

    For the millionth time, your moral preoccupations do not necessarily align with good policy.

    “You can all ask the Jews!”

    Really, Tony: You’re becoming creepier by the minute, pragmatic fallacies and all.

  8. No, cut government spending to reduce future tax obligations and lessen dependence on government but there is no evidence that actually cutting spending creates growth.

    No one needs to make up reasons to cut spending other than those stated above.

    1. there is no evidence that actually cutting spending creates growth.

      As long as “government spending” is considered part of the GDP equation, cutting spending will always reduce “growth.”

      However, when you’re deficit spending 8-12% of GDP to get a 1-2% growth rate, then clearly you’re not getting a good rate of return on your investment.

    2. Re: Palin’s Buttwipe,

      No, cut government spending to reduce future tax obligations and lessen dependence on government but there is no evidence that actually cutting spending creates growth.

      You’re technically right but you’re just indulging in hair-splitting. Cutting spending promotes growth where before it was stunted. What creates growth is private sector investment and production.

    3. but there is no evidence that actually cutting spending creates growth.

      Actually there is mountains of it,

      Try this to start:

      http://www.nber.org/papers/w15639

      Above 90 percent (debt the US is above 100%), median growth rates fall by one percent, and average growth falls considerably more.

      1. also try this Cato link.

        Yes i know it is a Cato link but it links to many independent studies that shows that cutting spending creates growth.

        http://www.cato-at-liberty.org…..ic-growth/

        The European Central Bank published a study showing “?a significant negative effect of the size of government on growth.”
        A study by two Harvard economists found that “large adjustments in fiscal policy, if based on well-targeted spending cuts, have often led to expansions.”
        The Organization for Economic Cooperation and Development noted in recent research that welfare programs are economically destructive because they lure people into dependency because “net disposable income would increase despite putting in fewer hours.”
        A study from the International Monetary Fund concluded that “Cuts to pension and health entitlements had the most beneficial effect on economic growth.”

  9. Another interesting finding in the Alesina/Giaviani paper is the correlation between spending cuts and business confidence.

    Even if one does not read their paper, just look at history: After the unknown Great Depression of 1921, the Harding government cut spending AND taxes; so did his successor (Coolidge) and ushered in the Roaring 20s which were times of great industrial and agricultural productivity and growth.

    So it was after WWII and after most of the New Deal departments were quietly phased out, again ushering in an era of great productive growth in the private sector. It was during the late 1930’s and during these times that a “climate of uncertainty” delayed or stunted investment.

    1. The 30’s had scant regulations and no payroll taxes with low income taxes. That environment coincided with the Great Depression.

      All this proves is that the business cycle is real and can’t be explained with simple GOP “low taxes create jobs” platitudes.

      1. Re: Palin’s Buttwipe,

        The 30’s had scant regulations and no payroll taxes with low income taxes.

        You’re kidding, right? I mean, you can’t be this ignorant, or can you?

        Hoover increased the tax rates for higher income earners from 25 to 63% in 1932, just before the election; FDR raised that rate to 90% just before the war. Hoover’s government imposed the Smoot-Hawley tariff that started a destructive trade war and drove a lot of exporting firms out of business – not to mention a lot of importers.

        There were so many programs and departments created during the FDR years to prop up prices that it would’ve mae a regulator green with envy. You have NO idea of what you talk about, shrike.

        1. So our 35% top rate should produce a roaring economy then. And low capital gains rates of 15% should too? And an effective corporate rate of 12% is just lovely.

          We live in a fucking low tax nirvana now and drilling is up 300% since Jan 2009 despite regulations. Exports are bigger than ever too. Free trade is bustling. Send Obama a donation in my name then please.

          1. We live in a fucking low tax nirvana now and drilling is up 300% since Jan 2009 despite regulations.

            Bullshit.

            Federal taxes + state taxes + property taxes + payroll taxes (not even counting capital gains taxes) say you don’t know what the fuck you are talking about.

            1. Compared to most periods in modern US history, taxes are low. This includes all components of the tax bill.

              1. Compared to most periods in modern US history, taxes are low. This includes all components of the tax bill.

                If that was true, it wouldn’t cost 4.5 times the amount of money, inflation-adjusted, to run the government that it did 50 years ago.

                1. You’re making the assumption that the GDP hasn’t grown in that period, which is incorrect.

                  1. To be more specific– the economy has grown more rapidly than inflation in the past 50 years, so government has been able to expand without necessarily raising tax rates.

                    1. The Derider| 8.27.12 @ 9:47PM |#
                      “To be more specific– the economy has grown more rapidly than inflation in the past 50 years, so government has been able to expand without necessarily raising tax rates.”

                      Now, *THAT* is a classic!
                      OK, I’ll bite. Let’s see the cherry picked data to support that claim.

                  2. You’re making the assumption that the GDP hasn’t grown in that period, which is incorrect.

                    Remove the deficit spending, and it hasn’t.

              2. “The Derider| 8.27.12 @ 9:18PM |#
                “Compared to most periods in modern US history, taxes are low. This includes all components of the tax bill.”

                OK, let’s see the proof for that claim.

                1. http://www.usgovernmentrevenue…..=clocal=s

                  Lowest since 1950.

                  1. Lowest since 1950.

                    So government revenues as a percentage of GDP are the same as in 1950, when taxes were FAR higher.

                    Not exactly proof that raising taxes will improve the situation, particularly when the government has never taken in more than 20% of GDP in taxes regardless of the tax rate.

      2. Palin’s Buttplug| 8.27.12 @ 6:57PM |#
        “The 30’s had scant regulations and no payroll taxes with low income taxes. That environment coincided with the Great Depression.”

        The Great Depression coincided with FDR’s presidency.
        I’ve got a better chance of causation than do you.

        1. No it didn’t. 1929-32 were dreadful under the GOP. Coolidge was POTUS before. You could say it was a GOP Depression.

          1. You’re arguing with somebody who thinks Obama caused the current recession even though it started a year before his inauguration. Arguing that events in the past affect events in the future, but not the other way around, isn’t going to be fruitful.

            1. The Derider| 8.27.12 @ 8:32PM |#
              “You’re arguing with somebody who thinks Obama caused the current recession…”
              Ya know, your posts lower the bar even without blatant lies.
              Add the lies, and you can’t get under that bar with newsprint.
              You are approaching shithead in the liberal ‘who’s the stupider’ competition.

          2. Palin’s Buttplug| 8.27.12 @ 7:38PM |#
            …”You could say it was a GOP Depression.”…
            *you* could say so, since you’re an ignoramus.

      3. The 1930s economy was moribund for the same reason ours now is: No one knows what the fuck the federal government is going to do next.

        1. When have people ever known what the fuck the federal government is going to do next?

          1. When they’re politically tied into the individuals in power.

            How the fuck do you think Congressmen can make so much money on insider trading?

            1. I mean, in which years have people been able to predict the actions of the US government well?

              If your answer is “Never”, then I don’t think government predictability has anything to do with the state of the economy.

              1. I mean, in which years have people been able to predict the actions of the US government well?

                All the years that people have had ties to those in government power. Can you not read?

                If your answer is “Never”, then I don’t think government predictability has anything to do with the state of the economy.

                If most people aren’t tied into a government bureaucracy that they believe determines winners and losers via a spoils system, then they have little reason to invest in the economy–save for those few individuals (Warren Buffet, for instance) who have insider ties to the current power structure.

                1. No, you’re still not getting it.

                  Could people predict the actions of government in 1973? 1793? 1937? If so, we could look at econometrics from those years to verify whether government predictability correlated with economic success. If, however, people haven’t been able to predict the government throughout history, then it’s not a useful variable to analyze to explain the great depression and our current recession.

                  1. No, you’re still not getting it.

                    You’re remaining pretty thick yourself.

                    Could people predict the actions of government in 1973? 1793? 1937? If so, we could look at econometrics from those years to verify whether government predictability correlated with economic success.

                    So what’s your explanation for why business growth can’t or won’t keep up with population growth? Is it because they think the government’s got their back?

                    1. Can you state your question more clearly?

                      It seems like you’re begging the question(note to trolls, I used it properly!)

                      Is it true that business growth can’t or won’t keep up with population growth?

                    2. Is it true that business growth can’t or won’t keep up with population growth?

                      I’ll post this link again:

                      http://www.oftwominds.com/blog…..e5-12.html

                    3. There’s also the 12-year drop in the labor participation rate:

                      http://data.bls.gov/timeseries/LNS11300000/

                    4. Baby boomers are aging and retiring.

                    5. Baby boomers are aging and retiring.

                      Baby boomers (those born in 1946) didn’t start to hit retirement age until 2011. What about the previous ten years?

                    6. Yes medicare has problems. Is there more to this argument?

                    7. Yes medicare has problems. Is there more to this argument?

                      It’s explained in the link–if you’re too stupid to understand it, that’s your problem, not mine.

                    8. The Derider| 8.27.12 @ 9:38PM |#
                      “It seems like you’re begging the question(note to trolls, I used it properly!)”
                      Oh, how impressive!

          2. Prior to FDR, the federal government was somewhat constrained by the Constitution. While they could do some damage, the potential for nation-wrecking master plans wasn’t on the table before then.

            Read Amity Schlaes’ “The Forgotten Man” for a more complete treatment.

          3. The Derider| 8.27.12 @ 8:33PM |#
            “When have people ever known what the fuck the federal government is going to do next?”
            Yes, bozo; raise taxes and add regulations.
            Got that?

      4. The 30’s had scant regulations and no payroll taxes with low income taxes. That environment coincided with the Great Depression.

        And the 1950s saw over 50% of the budget spent on defense. So what’s your point?

  10. I appreciate Reason posting an economic argument from an orthodox, empirical point of view, as opposed to the Austrian nonsense we see here so often.

    As a note to Mr Gillespie, the study states that it does not consider fiscal responses to the business cycle– in other words, the study is specifically omitting data from recessionary periods. So even if this data is verified, it says nothing about whether Obama’s economic interventions were effective or not in promoting recovery. They’re saying “spending cuts are less likely to cause recessions than tax increases”, not “spending cuts are better in a recession”.

    1. the study states that it does not consider fiscal responses to the business cycle– in other words, the study is specifically omitting data government deficit spending from recessionary periods.

      Fixed that for you.

      So even if this data is verified, it says nothing about whether Obama’s economic interventions were effective or not in promoting recovery.

      Well, as I’ve pointed out above, we’ve got basic math–8-12% in deficit spending to get a 1-2% return. Clearly the data shows that Obama’s economic interventions haven’t promoted recovery in either the raw or rhetorical sense.

      1. No you really didn’t fix anything because I accurately stated the assumptions of the report. Would you like the page and line where I found this information?

        I’m also not really sure you understand basic math here, because you’re comparing percentages of different numbers. Government spending is a fraction of GDP, not GDP itself.

        1. I’m also not really sure you understand basic math here, because you’re comparing percentages of different numbers. Government spending is a fraction of GDP, not GDP itself.

          No shit. If 8-12% of GDP is deficit spending (not ALL federal spending, just deficit spending), and the GDP growth rate is 1-2%, that means you have a “real” GDP of negative 6-10%. Did they not teach you addition and subtraction in school?

          1. OK, I see the issue now.

            We’re not running a deficit of 8-12 percent of GDP. We’re running a deficit of 8-12 percent of the total federal budget, which is 26% of GDP. So you need to multiply 8-12 by .26 in order to compare it to GDP. So now we compare 1-2% GDP growth with 2-3% deficit spending.

            1. We’re not running a deficit of 8-12 percent of GDP. We’re running a deficit of 8-12 percent of the total federal budget, which is 26% of GDP.

              Do you really not know how easy it is to verify these figures?

              US GDP is $15 trillion.

              The federal budgets from FY 2009 to FY 2011 have been $3.5 trillion.

              We’ve run deficits of $1.2-$1.8 trillion since FY 2009.

              In what universe is $1.2 trillion “8-12%” of $3.5 trillion?

              God, you make this too easy.

              1. You’re right, and I don’t know what I was talking about above!

    2. I appreciate Reason posting an economic argument from an orthodox, empirical point of view

      Concern troll joe shows his concern.

      As a note to Mr Gillespie, the study states that it does not consider fiscal responses to the business cycle– in other words, the study is specifically omitting data from recessionary periods.

      horses exist says science…therefore says joe “unicorns exist!!!”

      That is some pretty fancy foot work there buddy.

      Anyway if you want to look at “recessionary periods” try reading the actual literature:

      http://www.nber.org/papers/w15639

      http://www.amazon.com/This-Tim…..0691142165

      1. http://www.ecb.int/pub/pdf/scpwps/ecbwp1399.pdf

        try this one:

        ?we analyse a wide set of 108 countries composed of both developed and emerging and developing countries, using a long time span running from 1970-2008, and employing different proxies for government size? Our results show a significant negative effect of the size of government on growth. ?Interestingly, government consumption is consistently detrimental to output growth irrespective of the country sample considered (OECD, emerging and developing countries).

        1. Harvard economist Alberto Alesina also has some words on the subject:

          Politicians argue for increased stimulus spending, as opposed to spending cuts, on the grounds that it would speed up economic recovery. This argument might have it exactly backward. Indeed, history shows that cutting spending in order to reduce deficits may be the key to promoting economic recovery. ?recent stimulus packages have proven that the “multiplier”?the effect on GDP per one dollar of increased government spending?is small. Stimulus spending also means that tax increases are coming in the future; such increases will further threaten economic growth.

          http://online.wsj.com/article/…..98820.html

          1. I’m really happy to be reading and discussing orthodox economic interpretations here.

            Opinion pieces from the Wall Street Journal? Not so much.

            1. you don’t know who Alberto Alesina is?

              Here let me remind you:

              We examine the evidence on episodes of large stances in fiscal policy, both in cases of fiscal stimuli and in that of fiscal adjustments in OECD countries from 1970 to 2007. Fiscal stimuli based upon tax cuts are more likely to increase growth than those based upon spending increases. As for fiscal adjustments, those based upon spending cuts and no tax increases are more likely to reduce deficits and debt over GDP ratios than those based upon tax increases. In addition, adjustments on the spending side rather than on the tax side are less likely to create recessions. We confirm these results with simple regression analysis.

              http://www.nber.org/papers/w15438

              Kind of a Keynesian killer don’t ya think?

              1. I think the argument against this paper is that it does not differentiate between fiscal policy in the case of recession and fiscal policy outside of recession.

                New Keynesian economists would suggest increasing spending during a recession, and lower spending during a boom, so no, it’s not a Keynesian killer. But that’s probably the reason this study was done specifically looking at the non-recession portions of the business cycle.

                1. The Derider| 8.27.12 @ 10:11PM |#
                  “New Keynesian economists would suggest increasing spending during a recession, and lower spending during a boom,…”

                  New Communists would suggest a population of the New Soviet Man would prove Communism to be ‘correct’.
                  You have just identified why Keynsian econ is a fantasy; it requires governments to act as no government ever has.

                2. so no, it’s not a Keynesian killer.

                  how about this from the same author:

                  http://www.ecb.int/pub/pdf/scpwps/ecbwp1399.pdf

                  ?we analyse a wide set of 108 countries composed of both developed and emerging and developing countries, using a long time span running from 1970-2008, and employing different proxies for government size? Our results show a significant negative effect of the size of government on growth. ?Interestingly, government consumption is consistently detrimental to output growth irrespective of the country sample considered (OECD, emerging and developing countries).

            2. The Derider| 8.27.12 @ 9:44PM |#
              “I’m really happy to be reading and discussing orthodox economic interpretations here.”

              No, you’re happy to be floating your crap on the tubes.

              1. Tomato ToMAto

                1. The Derider| 8.27.12 @ 10:05PM |#
                  “Tomato ToMAto”
                  You’d love to believe your stupidity could so easily be excused.
                  It can’t; You’re really stupid.

      2. Call me a troll if you want, you didn’t actually contradict a word I said. This study says nothing about recessionary periods BY DESIGN.

        Also Sheldon Richman, Arch Austrian, really wouldn’t like this study because Austrian economics rejects empiricism and math as legitimite analytical tools. This study suggests that some of the empirical conclusions in the new Keynesian synthesis are wrong, and does so with data, and so I find it genuinely interesting.

        1. Austrian economics rejects empiricism and math as legitimite analytical tools.

          That is odd cuz the studies I listed all look at empirical evidence from past recessions. Here is what Sheldon Richman did:

          We study economic growth and inflation at different levels of government and external debt. Our analysis is based on new data on forty-four countries spanning about two hundred years. The dataset incorporates over 3,700 annual observations covering a wide range of political systems, institutions, exchange rate arrangements, and historic circumstances.

          Looks like empiricism and math to me. Published by the NBER no less.

          Concern troll joe has metamorphosed into a strawman rapist!!!

          1. wait that is not sheldon Richman

            that is Carmen M. Reinhart, Kenneth S. Rogoff

            opps looks like hack joe pulled a fast one on me.

            Not only is a beating a strawman he switched the strawman on me.

            I never even mentioned sheldon Richman in my links.

            Shame on you you dirty strawman rapist.

            1. He’s an author who regularly is published by Reason.

              Sorry for the confusion!

              What I’m saying is that I like discussing economics with conservatives and reading conservative economic articles, but that I find Austrian economics silly and boring.

              1. The Derider| 8.27.12 @ 10:14PM |#
                “but that I find Austrian economics silly and boring.”

                Yeah, real shame when someone calls you on you bullshit.

              2. I like discussing economics with conservatives and reading conservative economic articles

                Besides Mankiw there are no conservative economists. There are just economists.

                Keynesians (hard to call them economists) have not looked at the causes of and recovery from recessions with any study for over 30 years.

                Kind of fresh of you to claim Austrian economists reject empirical study when Keynesian only write op eds in the NYT rather then actually publish anything.

        2. The Derider| 8.27.12 @ 9:33PM |#
          …’because Austrian economics rejects empiricism and math as legitimite analytical tools.’

          Pretty much gave your ignorance away there.
          Schumpeter made the comment, after the Red Russian thugs won that the economists now had a true experiment. He was chastised in that most everyone saw the deaths of many.
          Wanna know who never tested his theories? Kenynes.

          1. Umm… no Sevo,

            Austrian economists really do reject empirical analysis and mathematical modeling as economic tools. This puts them in the substantial minority of economists.

            1. The Derider| 8.27.12 @ 10:15PM |#
              “Umm… no Sevo,
              Austrian economists really do reject empirical analysis and mathematical modeling as economic tools.”

              Umm, no Derider. I just gave you an example of empirical testing. So, umm, no Derider, you’ve just be caught in a lie.

            2. The Derider| 8.27.12 @ 10:15PM |#
              …”Austrian economists really do reject empirical analysis and mathematical modeling as economic tools”…
              Oh, and, who told you that?

              1. The amusing thing is that the study the article links too is empirical analysis that supports Austrian economics.

                http://papers.nber.org/tmp/28993-w18336.pdf

                joe is simply hand waving trying to invent some sort of schism that does not exist.

                “Oh empirical evidence…surely that can’t support Austrian economics”

                Up above he tries to call them conservative economists. What the fuck is a conservative economist? Only joe knows.

            3. The Derider| 8.27.12 @ 10:15PM |#
              “Austrian economists really do reject empirical analysis and mathematical modeling as economic tools.

              Oh, *now* I understand your ignorance. Some prof or instructor told you that early on, the Austrian school competed with the historical school, and thereby the Austrians rejected math and historical data!
              Well, no. Probably for the same reason you have no idea what libertarians propose; you take whatever conformation bias you can find and run with it.

  11. Derprider, Toney, PB, all of the retards are out to play in the ‘who’s the biggest dumbshit of HR?’ contest.

  12. The Derider| 8.27.12 @ 10:01PM |#
    “http://www.usgovernmentrevenue…..=clocal=s
    Lowest since 1950.”
    Uh, it would be a good idea to read what you link before it proves you to be an ignoramus.

    Your claim was this:
    The Derider| 8.27.12 @ 9:18PM |#
    “Compared to most periods in modern US history, taxes are low. This includes all components of the tax bill.”
    My request was this:
    “OK, let’s see the proof for that claim.”

    And you link to a chart which shows taxes increasing in what looks like an exponential progression from the 50s until now.
    How stupid are you?

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