Austerity 101

Natural Born Conservative (@LarryMWalkerJR) has a great post explaining the economics of austerity and what effects Federal tax rates and Federal spending have on GDP and Debt.

You should go read the whole post and see how Mr. Walker destroys the anti-austerity proposals from Paul Krugman but here is a great summary that should entice you to read the whole piece.

Following the Austerity Matrix, it turns out that:

  1. Tax hikes lead to the fiscal cliff no matter what happens with spending. Why? Because tax hikes lead to private sector austerity, resulting in job and benefit cuts, which leads to lower tax revenues and less economic output. So tax hikes should be off the table. The only reason they’re still being discussed in the United States is because of Obama’s “fairness doctrine”, which if you ask me is total nonsense. Besides, raising taxes on 1% of taxpayers won’t change anything for the other 99%, where the main problem is the lack of opportunities.
  2. Maintaining current tax rates can work, but only in conjunction with spending cuts. However, this only leads to slow growth, which is basically what we have now. Our current real gross domestic product (GDP) annual growth rate of 1.3% is not enough to change the trajectory of our ever increasing jobs deficit. If tax rates are maintained while spending levels are maintained or raised, we still wind up plunging over the fiscal cliff.
  3. The optimal fiscal austerity policy involves a combination of tax cuts and deficit reduction, which leads to rapid growth, or exactly what is needed following an economic crash. But, cutting taxes while maintaining or increasing spending levels only hurtles us over the fiscal cliff.

It really is that simple and let’s hope enough American voters understand this on November 6th.

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1 Response to Austerity 101

  1. Love the graph and explanation, Cosmo.

    Amazingly, millions of viewers Wednesday night had never heard Romney’s 5-point plan specifically because the MSM simply never covers it. This allows them to keep harping on “Romney doesn’t have a real plan”, “he wants to raise your taxes, and Obama wants to cut taxes”, etc.,… when there isn’t the slightest shred of truth to ANY of it.

    It is the same reason that a meme as ridiculous as “Obama has been the most fiscally frugal president in years” is allowed to persist: the obvious facts aren’t reported in the Media Bubble.

    Higher taxes and more spending will accomplish only one thing: our country’s destruction.
    Romney did an admirable job of communicating that the other night.

    We all need to keep getting the word out…it’s starting to take hold.

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