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I'm fascinated that there's still a debate on the question of whether the best way to help the economy in the long run is by higher taxes on the rich plus government stimulus versus austerity and lower taxes. You would think that with so many governments around the world trying one policy or the other for the past hundred years we would have an unambiguous track record to inform us. One of those approaches - stimulus versus austerity - must be better than the other, right?

Instead of clarity, I see proponents of government spending and higher taxes cite the Clinton administration as a time when higher tax rates coincided with a booming economy and a more balanced budget. Proponents of austerity point to Estonia's recent success in belt-tightening. Where's my clarity, damn it?

I declare a link war!
In the comments, give me links to support one argument or the other with historical examples. Keep your comments brief, please, with just a summary of the link. I'll compile them and declare a winner.

My bias going into this is that the best approach to stimulus versus austerity depends on whatever else is happening in the economy. If you have a dotcom boom happening, you can probably raise taxes with impunity and balance the budget too. If not, perhaps the austerity thing makes more sense. That's my starting point. I'd like you to change my mind.

Link on!

[Update: This link will be hard to beat. Thanks to Kuvuplan for that.]


 
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Sep 13, 2012
I don't think it matters one way or the other because the key is not what you do, but how you do it. A market that has confidence in the government (as signaled by strong, resolute action), will respond positively to both austerity and stimulus (or better yet, stimulus followed by a credible, post-bust austerity plan). A government that dithers can't make anything work.
 
 
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Sep 13, 2012
I hate to say it, but surely an economy is way to complicated a beast to just replicate what someone else did...
 
 
 
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