Historical Precedent for Spending Cuts?

The resurgence of small-government populism has got me excited. I know tax cuts are viable because they've happened before. Top marginal rates have been in the 70s in my lifetime. A few European countries have adopted flat tax policies. Americans like the idea of tax cuts.

What I'm more pessimistic about is spending cuts. I don't think spending has been cut in a significant way in my lifetime. The last time major spending cuts were talked about (that I can remember) was after 1994, but that was short-lived as people freaked out about Newt Gingrich taking away their Social Security and Medicare.

This paints a mixed picture: tax cuts could potentially improve the economy and raise tax revenues provided we're to the right of the Laffer maximum. But at best, the result will be like the 1990s when the budget was (almost) briefly balanced under Clinton. Then some other crisis will cause spending to increase again.

Is there any historical precedent for large-scale spending cuts? Can we point to a time and place in the past and say, "That's our example of what should happen today"?

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As Percent of GDP

Name That Blip at EconLog. That is as a percent of GDP, not in absolute terms.

Ending a large war seems to do it. There are some other dips. There is a case to be made for just holding the line, at which point inflation and GDP growth will decrease the relative size of the government spending component.

Right after World War II.

Right after World War II. The difference is this current war has no identifiable enemy and no end in sight.

Can we point to a time and

Can we point to a time and place in the past and say, "That's our example of what should happen today"?

Secession from the British empire.

I bet that caused government

I bet that caused government spending in America to shoot up dramatically.



Picture, thousand words

That is awesome. No wonder the Canucks topped us in economic freedom this past year, eh?

Yeah, but

Yeah, but look where they had to go (>50% of GDP) before they rolled back.

Was there a brain drain or capital drain from Canada to the US (their major trading partner) in the '90s prior to the spending cuts?

No wonder the Canucks

No wonder the Canucks topped us in economic freedom this past year, eh?

Haha, I know. It's almost painful for me to admit they have something decent going up there in some respects (which I realize is totally irrational tribalism, but oh well).

I love Canada. The only

I love Canada. The only thing that worries me about this situation is that people might credit Canadian socialism for the beneficial effects of Canadian economic freedom, and vice versa for the US. It happens often enough: blaming the bad effects of Bush's socialism on the free market, blaming the problems of American highly socialized medicine and finance on the free market, and so on and so forth.

USSR under Gorby

Granted, things would have to either a) get a lot worse, or b) fall behind some key reference country (e.g. Mexico, China).

I wonder what effect a

I wonder what effect a constitutional amendment which limited Congressional and Executive office pay (including the president and cabinet) to 150% of the median household income in the US during any time that the US held a national debt greater than 5% of annual GDP would have.

Profound and important

Profound and important reforms would follow. Debt and GDP figures would turn to outrageous junk overnight, or at least over-financial-year. If the inherent inefficiency of Big Government prevented it from fulfilling the newly-mandated demand for junk statistics, it might be forced to turn to the invisible hand to resolve the crisis; specifically, the invisible hand slipping it a big brown envelope under the table.

There again, if anybody managed to change the balance of political power enough to get that through in the first place, presumably we would already have more of a lock on politicians' behaviour than we do now. But where did we get that, then?