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Opening Arguments

It's cutting time

If the president's panel on the deficits and debt say the country can't survive the VAT or some other new revenue scheme, just call them liars:

Yet there is evidence that Congress can cut spending—and cut it by a lot. First, consider a new Goldman Sachs Global Economics study by Ben Broadbent titled “Fiscal Tightening Need Not Be Electorally Costly, But It Will Test Government Unity.” Broadbent shows that spending cuts can actually be a good thing politically. “It is commonly assumed that cuts in government spending will be both economically painful and electorally costly,” he writes. “Neither is borne out in the data. We've written before about the limited (and sometimes positive) effects of spending cuts on economic growth, at least in open economies. Here we add some simple analysis on the electoral consequences and, like others, find no evidence that spending cuts reduce support for the incumbent government. If anything the opposite tends to be true.” Among other evidence, the paper cites the three governments that executed the most high-profile expenditure-based deficit reductions in recent history and yet were re-elected: Ireland in 1987, Sweden in 1994, and Canada in 1994.

[. . .]

 Other countries have managed to cut spending. According to the IMF study, over the last 30 years nine developed nations have cut their structural deficits by at least 10 percent of GDP. Ireland reduced spending by 20 percent from 1978 to 1989. Sweden and Finland both achieved cuts of 13 percent from 1993 to 2000, and Sweden pulled off another 13 percent cut from 1980 to 1987. Denmark managed a 12 percent reduction from 1982 to 1986; Greece, 12 percent from 1989 to 1995; Israel, 11 percent from 1980 to 1983; Belgium, 11 percent from 1983 to 1998; Canada, 10 percent from 1985 to 1999.

The longer we wait, the harder the