Havard economists Alberto Alesina and Silva Ardagna have a new working paper on whether tax or spending policies work the best. They are using OECD data from 1970 and 2007.
“Fiscal stimuli based upon tax cuts are more likely to increase growth than those based upon spending increases. As for fiscal adjustments those based upon spending cuts and no tax increases are more likely to reduce deficits and debt over GDP ratios than those based upon tax increases. In addition, adjustments on the spending side rather than on the tax side are less likely to create recessions.”
Are you listening, Mr. Obama and Mr. Krugman?
via Greg Mankiw’s blog.