Spending cuts work to control deficits
Image via WikipediaGood fiscal policy doesn't require miracles — or dramatic showdowns. All politicians have to do is limit the growth of the public sector. Combined with normal revenue growth, this approach eliminates red ink very quickly.There is much more.
This is what happened in the U.S. during the Clinton-Gingrich years. Between 1994 and 1999, total government spending increased by an average of just 3% annually. The budget deficit, which was projected in early 1995 (18 months after the 1993 tax increase!) to remain above $200 billion for the rest of the century, quickly became a budget surplus once spending was restrained.
Fiscal discipline also works when it is tried in other nations. Data from the Economist Intelligence Unit reveal that four nations — Canada, Ireland, Slovakia and New Zealand — dramatically reduced budget deficits in recent decades by imposing strict limits on government spending.
Interestingly, these data also reveal that the tax burden was stable or falling during these periods of fiscal progress.
...
The art of saving money is living below ones means. That is something that governments can also do, and prosperity is a result. While Ireland maybe creeping back into basket case status because of its own housing bubble, Canada avoided the housing bubble by having smarter lending policies.
Comments
Post a Comment