Robert P. Murphy, What Economic Research Says About Fiscal Austerity and Higher Tax Rates | Library of Economics and Liberty

Research Making the Case for “Expansionary Austerity”

The studies cited above are just the tip of the iceberg. There is a large literature empirically documenting the impact of taxes on economic growth. At the same time, many studies have challenged the effectiveness of traditional Keynesian “fiscal stimulus” during recessions. One implication of this line of research is that a country with a growing public debt burden could benefit from a sharp reduction in government spending, even in the short run. This phenomenon has been called “expansionary austerity.”

via Robert P. Murphy, What Economic Research Says About Fiscal Austerity and Higher Tax Rates | Library of Economics and Liberty.

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