Quote:
Originally posted by ulfie@Aug 7 2003, 11:25 AM
Tax cuts are fine and dandy but I would like to see spending cuts as well. Notice how no one in government ever talks about cutting spending. I'm a firm believer that tax cuts generate more revenue and are good for the economy but at the same time the politicians just go out and spend more and more.
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I don't think this is a good idea right now. I do agree that shrinking the size of the government budget is a good thing but think the timing is wrong.
Rough numbers ::
The deficit this year was about $400 billion. The GDP was about $10.4 trillion in 2002 and about $10.1 trillion in 2001. If the government had balanced the budget this year with soending cuts, GDP would be that $400 billion smaller. GDP would be decreasing and the economy would be in a recession.
Since government expenditures contribute positively to the GDP (GDP = personal consumption + private investment + government expenditures + exports/imports), the massive deficit spending is masking an underlying even weaker economy. Since there is velocity to that money (the average dollar in circulation is spent 8x in a year right now), the effect is even more significant.
It seems that we can have it one way or another. I think governments should cut taxes and increase spending during slow growth periods and make more of an effort to do the opposite during strong economies.