Large spending cuts will revive economy
The Obama administration says our ailing economy needs the Keynesian stimulus of government spending to make up for a lessening of consumer spending. It thinks this will put more cash in the till and businesses will feel confident enough to expand their operations and hire more workers. Any talk of budget cuts raises fears of recession, but history shows this isn’t true.
Example: In 1946, at the end of World War II, U.S. federal spending was cut by 66 percent in one year and “experts” predicted a 35 percent jobless rate. Instead, within 18 months of VJ Day, more than 10 million demobilized vets and millions more wartime workers found work and the unemployment rate never went above 3.9 percent.
Example: In the 1980s, due to strong unions and socialist government policies, New Zealand was on the brink of bankruptcy. Large spending cuts, from a libertarian-leaning government, saved them from collapse and allowed for the creation of a thriving economy.
Example: In 1994, the Liberal Party of Canada took power, looked at the books and decided on strong medicine: a ratio of spending cuts to tax increases of 7-to-1, which caused the deficit to disappear by 1997 and the economy to boom.
Our problems can be solved, but it will require political courage. Are we up to it?