The Biz Bucks Blog provides former Biz Bucks students and other busy professionals with a summary and commentary of seminal articles from the opinion pages of the Wall Street Journal. You can be notified of a new posting by subscribing to the blog (enter email in box on right) or by following on Twitter: @BizBucksGuy.


Time for an Ol’ Fashioned Fat Fry April 7, 2014 11:20 AM | Tagged as Allesina, austerity, Clinton, Fat Fry, Keynesian

WSJ April 7, 2014 Page A19: A Golden Fiscal Rule Nurtures Prosperity, by Daniel J. Mitchell

Once again, data trumps ideology. In this op-ed piece, Mr. Mitchel relates several countries which, over the past few decades, have chosen to reduce the size of government (relative to their GDP) through cuts in spending growth. While not quoted in article, this coincides with the work of Dr. Alberto Allesina of Harvard’s School of Economics who has studied governmental responses to recessions. The typical Keynesian response of increased taxation and increased governmental spending is less effective than the classical economic (insert common sense) approach of reducing government spending and reducing taxes.

Two words to be aware of from the intelligencia are austerity and growth. This is a ruse. Those who support government bloat define these two terms as austerity by deficit reduction through…you guessed it … higher taxes. Growth on the other hand is defined as government growth. What is missing is the obvious third option of cutting government spending and lowering taxes.

Mitchell’s thesis is to have government growth rise slower than the private economy. This spurs the economy. All nations who have used that approach have prospered while they were on that track. They include Ireland, Canada, Sweden, Germany, Latvia, Slovakia, Singapore, Italy Lithuania, Taiwan, Israel, Estonia, Iceland, New Zealand, Switzerland, and the Netherlands…albeit during different eras.

Also of note, the US had a favorable outcome from this same tactic during Bill Clinton’s presidency. It is arguable that the conservatives pushed Bill into that approach.

 When will we wake up to the fact that our government is too large. The Biz Bucks Guy’s father had a term for what is needed. He would say “Every organization from time to time needs a good ol’ fashioned FAT FRY.”  It’s time for an old fashioned fat fry in Washington, DC.

[Although opinion is included, The Biz Bucks Blog is primarily written to former students of Biz Bucks training courses to encourage their daily reading of the three opinion pages of the WSJ. This refreshes principles of Biz Bucks courses and improves business acumen on topics not discussed in Biz Bucks training.]

 


Posted By The Biz Bucks Guy
Posted in MacroEconomics, Tax Policy | 0 Replies

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