As we’ve all heard so often from the Aus­trian School adher­ents, the proper behav­ior for gov­ern­ment in times of eco­nomic down­turns is to reduce spend­ing to match the lower tax rev­enues result­ing from the lower amounts of eco­nomic activity.

Amer­i­can Repub­li­cans, of course, dou­ble down on this by sug­gest­ing that we should not only reduce spend­ing to match the lower tax rev­enues, but that we should also lower tax rates to fur­ther reduce tax rev­enues, and reduce spend­ing even fur­ther to match that lower amount of tax rev­enues. But today let’s look at the Aus­tri­ans. Well, not the Aus­tri­ans, per se, but rather a nation that has opted to hew pretty closely to the Aus­trian School of eco­nom­ics.

Yes, we don’t have to merely the­o­rize about what the results would be in fol­low­ing the Aus­trian model of reduced gov­ern­ment spend­ing dur­ing a reces­sion. We can make a pretty direct com­par­i­son. (more…)