Fiscal discipline:The Path to Prosperity

by Laura Ehrenberg-Chesler on June 18, 2010

in Credit Crisis,Debt,Fiscal Policy

Since the beginning of the financial crisis that started in 2008, I have written about the individual reducing their debt burden, and restoring their balance sheets to health.  Short term pain, long term gain.

Now governments around the world are facing the same issue individual consumers have faced.  Too much borrowing, not enough income to pay for it.

What if instead of borrowing more, governments around the world tighten their belts, the way the individuals in this country have done?Some think this would hasten their demise, and cause massive debt defaults and economic recessions/depressions.

However, there is an alternate view.  This was well articulated by David Brooks, a New York Times columnist who discusses a paper written by a Harvard Professor on June 10.  “Many even sharp reductions of budget deficits have been accompanied and immediately followed by sustained growth rather than recessions even in the very short run.  These are the adjustments which have occurred on the spending side and have been large, credible and decisive…”

Let’s support decisive, credible budget reductions.   It will lead us down the path to prosperity.

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