Excellent article from David Brooks on the economics of cutting spending

June 11, 2010 10:18 AM

I wrote yesterday about commentary and economic evidence coming out of the United States about how the effect on confidence might mean cuts in spending boost economic growth.  In his column for the New York Times David Brooks takes up the same topic.  The whole article is worth reading but this is a particularly powerful section:

"In times like these, deficit spending to pump up the economy doesn’t make consumers feel more confident; it makes them feel more insecure because they see a political system out of control. Deficit spending doesn’t induce small businesspeople to hire and expand. It scares them because they conclude the growth isn’t real and they know big tax increases are on the horizon."

He then points to two academic papers which come to the conclusion that fiscal adjustments can lead to higher economic growth.  It is becoming very clear that anything but strong action to bring down deficits now is the path to ruin.  From the outset the case for a Keynesian attempt to borrow our way out of the recession was weak.  It is becoming completely untenable.

I wrote yesterday about commentary and economic evidence coming out of the United States about how the effect on confidence might mean cuts in spending boost economic growth.  In his column for the New York Times David Brooks takes up the same topic.  The whole article is worth reading but this is a particularly powerful section:

"In times like these, deficit spending to pump up the economy doesn’t make consumers feel more confident; it makes them feel more insecure because they see a political system out of control. Deficit spending doesn’t induce small businesspeople to hire and expand. It scares them because they conclude the growth isn’t real and they know big tax increases are on the horizon."

He then points to two academic papers which come to the conclusion that fiscal adjustments can lead to higher economic growth.  It is becoming very clear that anything but strong action to bring down deficits now is the path to ruin.  From the outset the case for a Keynesian attempt to borrow our way out of the recession was weak.  It is becoming completely untenable.

Latest Blogs:

TaxPayers' Alliance Icon

The end of austerity?

1:00 AM 21, Jun 2017 Alex Wild

TaxPayers' Alliance Icon

Income tax burden increasingly unequal

4:03 PM 31, May 2017 Jan Zeber

TaxPayers' Alliance Icon

TaxPayers' Alliance reacts to the SNP manifesto

1:24 PM 30, May 2017 The TaxPayers' Alliance

TPA Bulletin - 19th May, 2017

4:39 PM 19, May 2017 The TaxPayers' Alliance

TaxPayers' Alliance Icon

Agriculture

11:15 AM 18, May 2017 The TaxPayers' Alliance

TaxPayers' Alliance Icon

Transport

10:39 AM 17, May 2017 The TaxPayers' Alliance