New research suggests that legislators should cut spending and enact growth-inducing policies. The reasoning? According to the study, spending cuts can positively affect economic growth and are the only historically reliable way to lower deficits and debt.
The authors of the study, Alberto Alesina and Francesco Giavazzi, write that “spending-based consolidations [spending cuts] accompanied by the right polices tend to be less recessionary or even have a positive impact on growth.” (emphasis added)
These findings confirm what was certainly true in past U.S. recessions.