Tax Increases x Spending Cuts (Rugy & Alesina)

Austerity: the relative effects of tax increases versus spending cuts by Veronique de Rugy and Alberto Alesina, published by Mercatus Center (3/2013). “A new study expands on previous research that examined why there was an 80 percent failure rate in over 100 different attempts to reduce the debt-to-GDP ratio in all developed countries over the past 30 years. According to the new study, two things mattered for the successful 20 percent – a focus on spending cuts and policy reforms that increase competitiveness. These structural policy changes include liberalization of markets for labor and markets for goods and services, readjustments of public sector size and pay, and public pension reform.”