Yostivanich

But don’t we need to worry about gov­ern­ment debt? Yes — but slash­ing spend­ing while the econ­omy is still deeply depressed is both an extremely costly and quite inef­fec­tive way to reduce future debt. Costly, because it depresses the econ­omy fur­ther; inef­fec­tive, because by depress­ing the econ­omy, fis­cal con­trac­tion now reduces tax receipts. A rough esti­mate right now is that cut­ting spend­ing by 1 per­cent of GDP raises the unem­ploy­ment rate by .75 per­cent com­pared with what it would oth­er­wise be, yet reduces future debt by less than 0.5 per­cent of GDP.

via Paul Krug­man Blog – Lost Decade, Here We Come. Krug­man on why you don’t cut gov­ern­ment spend­ing in a weak economy.