What is Alesina's central theory on fiscal adjustments?
My central argument, developed with colleagues, is that fiscal adjustments—cutting deficits—are more likely to succeed and lead to growth when they rely heavily on spending cuts rather than tax increases. This is because spending cuts, especially in government wages and transfers, tend to be less contractionary and more politically sustainable in the long run. Tax-based adjustments often trigger consumption booms followed by busts and are politically harder to maintain.
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