For a long time, Republicans believed that they could shrink the size of government simply by cutting taxes. The idea was called “starving the beast,” and the hope was that with less tax revenue coming in, politicians down the road would be forced to cut spending.
Not only did this not work, it backfired in epic proportions. Economist Christina Romer — who is now an advisor to Barack Obama — showed in a paper called “Do Tax Cuts Starve The Beast” (NBER) that in fact they caused in increase in spending. Why? Because once a government was in deficit, it didn’t really matter how much was being spent. Debt was debt. If you’re $500 billion in debt, why not take on $1 trillion in debt? It doesn’t really matter. The government has broken past any limits of its own revenue-raising ability, so you might as well spend like crazy.
If you think about it, it’s actually as much a lesson in behavioural economics as it is in fiscal economics. And it has an application in real life.
From time to time you may have noticed that this author is an afficianado of waking up extremely early, There’s somethign really nice about getting up well before dawn and beating the rush of the world. We highly recommend it, but it can be very tough. It certainly beats sleeping in, doing the snooze-button-shuffle and then feeling rushed and behind the rest of the day.
The answer? Wake up very early. Pick a time that you consider to be a real accomplishment if you wake up by then. Somedays it won’t work out, but many days you’ll be thrilled at the feeling of setting a goal and making it, and springing right up.
The real danger though is in hitting snooze, and letting yourself drift. As Christina Romer taught us, once you hit one snooze, what’s another snooze? Once you hit two snoozes, what’s two more? As soon as you let yourself slip into sleeping in (even if it’s just a little bit) then all bets are off. You can’t let yourself indulge, otherwise it’s totally shot. And the only way to avoid indulging is to wake up extremely early, so that it’s not even a possibility. If you set your alarm clock at 4:30 AM, you won’t even want to hit snooze, because really, what’s the point of having half-sleep between 4:30-5:30? You could’ve been getting real sleep during that time.
So if you’re in business, a go-getter, an entrepreneur, or doing anything else in life where it will pay to get a jump on the day, then listen to Obama’s advisor. Take a strict, aggressive stance and don’t even put yourself in a position to take the easy way out.
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