Harvard economists: Cut taxes to increase growth

While elected officials at the state and federal level debate the need for tax increases and "fiscal stimulus spending," a recent economic study suggests instead taxes and spending should be cut to spur economic growth and reduce deficits. Here is the abstract from an October 2009 study by Harvard economists Alberto Alesina and Silvia Ardagna (Large changes in fiscal policy: taxes versus spending): "We examine the evidence on episodes of large stances in fiscal policy, both in cases of fiscal stimuli and in that of fiscal adjustments in OECD countries from 1970 to 2007. Fiscal stimuli based upon tax cuts are more likely to increase growth than those based upon spending increases. As for fiscal adjustments those based upon spending cuts and no tax increases are more likely to reduce deficits and debt over GDP ratios than those based upon tax increases. In addition, adjustments on the spending side rather than on the tax side are less likely to create recessions. We confirm these results with simple regression analysis . . . READ MORE