The Skids get Greased
When governments borrow and spend it produces short term growth which allows it to tax, borrow and grow some more. To a degree, it compounds on itself on the way up. When things turn around the same is true in reverse. Budget cuts (austerity) cause the government dependent economy to shrink, reducing tax revenue and driving the crisis orders of magnitude higher. If our government cut the 1.5 Trillion it spends in excess of revenue, how big a hit would the economy take? I don’t know, but logic says it would be huge, and a reduction in the economy would result in an even larger reduction in tax revenue to the government, due to progressive income tax rates, forcing yet larger cuts to spending. When you spend tomorrow’s revenue you bring tomorrow’s growth forward, but put that growth on an unsustainable footing. We see ample evidence of this happening around us, yet we cling to our same irrational economic and civil paradigms and look to government for solutions when it has caused all of this.
Moody’s downgrade tips Greece closer to brink: Thomson Reuters Business News – MSN Money: money.msn.com/business-news/article.aspx?feed=OBR&…93604