Alberto Alesina and others continue to study the effects of government austerity on the broader economy. In their current working paper, they find

deficit reduction policies based upon spending cuts are much less costly in terms of short run output losses than tax based adjustments. On average fiscal adjustment based upon spending cuts have very small output costs and in some cases they are expansionary.

Earlier research showed, “the least costly [fiscal adjustments] were those accompanied by supply side reforms and by wage moderation.” In this paper, Alesina and his co-authors find that even without those adjustments lower spending alone can inspire business confidence that the long-term trajectory of government debt will improve. They then look at other reasons why lower spending slows the economy less than higher taxes.

Slower spending growth when there is no deficit makes it possible for government to save for a rainy day and reduce taxes, as we have seen in North Carolina. Higher taxes have a tendency to stick around to pay for higher spending, as we have also seen.