Federal Spending: Can We Cut Our Way to Prosperity?

Over at the Financial Times, Martin Wolf offers his answer to that question:

If anyone tells you that cutbacks in this year’s and next year’s federal spending will encourage enough additional private spending to make up the difference — never mind narrow the inherited trillion dollar output and jobs gap — look him hard in the eye and ask him if he’d really bet his children’s tuition money on that proposition. It’s nonsense. Reduced sales to government and lower transfer payments from government, therefore less spendable private income, and more jobless workers and idle factories, will be more likely to cause both households and businesses to reduce their spending.

Makes sense to me.  The silly games being played in DC right now aren’t the equivalent of arranging deck chairs on the Titanic.  It’s more like punching a hole in the side of the hull to prevent the build up of bilge water.  Not only is it nonsense, it is downright dangerous.  You can read Wolf’s take on it here.

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