IMF Proof That Spending Cuts Work Better Than Tax Increases
Harvard economist Alberto Alesina cites an IMF analysis with empirical data that spending cuts are better for the economy than tax increases. Refer to link way below at bottom. Quick summary and comments below:
Alesina supports great point that private investment often increases after government spending cuts. This makes sense as business confidence increases after cuts. A worse policy is increasing taxes thinking this will decrease debt. Rather it increases debt because the economy slows resulting in less revenue to the Treasury. Therefore we warn Boehner – do not cave in to tax rate increases.
In 2011, the International Monetary Fund (IMF) identified episodes from 1980 to 2005 in which 17 developed countries had aggressively reduced deficits. Each episode was classified as either “expenditure-based” or “tax-based,” depending on whether the government had mainly cut spending or hiked taxes.
Results: Cutting spending resulted in very small, short-lived — if any — recessions, and raising taxes resulted in prolonged recessions.
*** It is very encouraging and extremely significant to learn of The IMF conclusion. Why? Because when the Day of Reckoning comes to the US (exploding debt leading to dollar collapse and forced debt and budget restructuring), the IMF will play a major role. This may then lead to a dismantling of the Nanny State, thus then allowing US capitalism to regroup and lead the world again to new heights in prosperity.
Contrast this to a scenario where at the Day of Reckoning, Obama consults with his Leftist Globalists such as George Soros that the time is now to expand government control over much more of the economy. This would then implement what may be Obama’s ultimate goal – an Alinsky variant Marxism in the US. The IMF may prevent this.
Except for my comments about Marxism, this (collapse, great pain, then new prosperity ) is in line with economic expectations that Robert Wiedemer precisely details in this 3 Aftershock Economy books. Reference — https://economics501.wordpress.com/category/aftershock-economy/
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