Monday, January 6, 2014

We did austerity

Total government expenses divided by nominal GDP, in the blue. Just for grins, I added real growth, in the red. We did austerity, DeLong says we didn't do much. We did a lot, good for us. The blue line id headed down hill.

If we keep driving down total government expenses then we might have an economy like Bill Clinton had.  But, some will say, that was mostly state and local budget cutting. Well, yes indeed, but its the only cutting we had available since Nancy Pelosi wants everything coming from DC.

Look at the red line, real growth. See it slightly fall when Regan was started spending like a Communist? Then see it slightly rise a bit when Bill came and set the budgets straight? Looks to me like we get one percent more growth when we get that spending down by 5%. We call that a negative effect from more government spending at the current efficiency levels.  Do you see growth, the red line, take off, at the very end? That happened when Brown was doing realignment and DC doing austerity, and a slight tax hike. That is how you get growth.

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