One of my recent blog posts (“Balancing Budgets: The Government is Nothing Like a Family“) stimulated a lively discussion about the effects of budget-cutting on the economy. As I noted in that post, large-scale austerity measures (cutting spending and raising taxes in order to balance the budget) have the perverse effect of actually causing deficits by depressing the economy further if the economy is not yet strong enough to withstand the fiscal tightening. Widening deficits add more to the debt and amplify demands for more austerity, which then leads to further depressed economic activity, and a vicious cycle ensues. This is not an argument against deficit reduction, but rather against deficit reduction while the United States economy (and the global economy, as well) is still incredibly fragile.
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