Saturday, July 30, 2011

Rugy: Separating economic myths from economic truths

The Facts About Spending Cuts, the Debt, and the GDP - Reason Magazine

Veronique de Rugy  has written an excellent article
explaining how spending cuts are far more effective than
tax increases for reducing out of control government spending and debt growth. There is a video and a copy of the article
at the link. i believe the 2 page article is far more effective than the video. Highly recommended.

Raising the debt limit might put off a downgrade disaster in
August, but that still isn’t enough—as
Standard & Poor’s recent warning
made clear. Perhaps the
most important shot not heard around the world was S&P’s
other admonition: Namely, that the U.S. bond rating will
be downgraded in three months, if not sooner, unless we do
something about government spending. Beyond raising the debt limit,
S&P laid out clear criteria for avoiding a downgrade: 1) reduce
the debt by about $4 trillion; 2) agree to a credible plan within
three months; and 3) guarantee that this newfound fiscal discipline
will actually stick.

If S&P isn’t bluffing, then lawmakers should get serious
about reducing the debt-to-GDP ratio, and they should do it
quickly. But how do we achieve such a task?

Myth 1: You cannot reduce the deficit to an
appropriate level without also raising taxes.

Fact 1: Spending cuts are the most
effective way to reduce the debt-to-GDP ratio.

read the rest.

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