Wednesday, June 13, 2012

Will Mitt Romney Have His Membership in The Axis of Incoherence Revoked??

Romney:  Spending Cuts Slow Economic Growth

Well this was positive - or it was until his spokesman backed away from it.  But I think it shows that he understands basic macroeconomics.  However, it brings to mind a question:  if decreasing government spending decreases growth, then shouldn't increasing government spending increase growth?  Actually I would guess that even during a liquidity trap there is probably a government spending equivalent of the Laffer curve.  Zero government spending leaves you with little growth.  Increasing government spending increases growth up to a point.  And after that point further increases in government spending decrease growth.  But where are we relative to the peak right now?  Is Romney suggesting that we are near the peak?  Maybe the Laffer curve is the wrong analogy.

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