Should Europe Continue Austerity? Join the Debate at US News with Veronique de Rugy

Reason columnist and Mercatus Center economist Veronique de Rugy is participating in a debate about austerity and Europe over at US News & World Report's website.

Austerity is a concerted effort to reduce the debt-to-GDP ratio, either through cutting spending, raising taxes, or a mixture of the two. Here's the set-up at US News:

In light of the constant string of bad economic data, many European leaders have changed course away from austerity, the spending cuts and tax increases that were meant to stem the continent's crisis and ignite confidence in the eurozone's ability to deal with its problems. Instead, several countries – including France, Spain and Poland – have received permission to ditch their budget targets and run bigger deficits in an attempt to boost job creation. (But they are still being forced to adopt labor market reforms.)

In the pages of Reason and elsewhere, de Rugy has argued forcefully that cutting spending makes sense for a host of reasons and is a preferred action especially in uncertain and rotten economic times. Here's a snippet from her piece:

While the finding that spending cuts are more effective at achieving debt reduction is not controversial, there is still significant debate about the short-term economic impact of fiscal adjustments. There are, however, some clear lessons:

1) Expansionary fiscal adjustments are possible.

2) While fiscal adjustment may not always trigger economic growth, spending-based adjustments are much less costly in terms of output than tax-based ones. In fact, when governments try to reduce the debt by raising taxes, it is likely to result in a deep and pronounced recession, making the fiscal adjustment counterproductive. Thus, we shouldn't be surprised by theimpact that tax-revenue based austerity has had in Europe.

3) These expansionary fiscal adjustments are more likely to succeed when they are accompanied by growth-oriented policies such as labor and goods market liberalization. Monetary policy was also proven to facilitate the spending cuts. Countries such as Germany and Finland, and other more recent examples such as Estonia and Sweden, have managed both debt reduction and some level of growth.

Read the whole thing.

US News' "Debate Club" includes other writers, such as Dean Baker of the Center for Economic and Policy Reserach and David Callahan of Demos (both strong anti-austerians). Read through the offerings and then vote for whomever you think is most convincing.

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  • Hyperion||

    Well, to start out with, we know they are NOT going to cut spending. So what are they going to do? Raise taxes, that's what. Only there is not enough left to tax, and the folks who do have a lot of money, are fleeing.

    Here's my thought on it. Europe should just not continue, period. Let it break apart into the previous countries that make up the EU and they can try some little economic experiments. Of course, the socialists will try to attack any country that tries free market solutions, because they don't want to be embarrassed by the failure of socialism, again.

  • Tony||

    Your policies are failing right now.

  • General Butt Naked||

    Yeah, over a century of increased regulation, taxes, government, cronyism, social engineering, welfare, and warfare are just what people like Hyperion wanted.

    Damn, you're dumb. I'd feel bad for you if you weren't such an arrogant prick.

  • Tony||

    Arrogance is defending thoroughly debunked economic math. It's also embarrassing for you and bad for the world.

  • General Butt Naked||

    I don't understand how you learned to write without being able to read.

    And don't give me shit about "math", you don't know a fucking thing about math.

  • Tony||

    You hold onto possibly the most unrigorous, unscientific economic worldview that exists. We needn't address any details to be almost absolutely certain that you're wrong about everything.

  • Cytotoxic||

    We needn't address any details engage in logical thinking to be almost absolutely certain that you're wrong about everything. conceited lying sacks of shit.

  • General Butt Naked||

    Well, some simple mathematics should be able to prove your point. I mean, if one claims that a model is "unscientific" one should have to quantifiably demonstrate it. You can't do that, of course, so maybe people should take your words with a grain of salt.

  • Sevo||

    Tony| 5.30.13 @ 7:10PM |#
    "You hold onto possibly the most unrigorous, unscientific economic worldview that exists."

    Nope, shithead. You got 'em beat all hollow.

  • ||

    Lying sack of shit tells lies.

  • Sevo||

    Tony| 5.30.13 @ 6:41PM |#
    "Your policies are failing right now."

    1917 to 1989, shithead.

  • Rrabbit||

    Tony, which European country are you talking about?

  • WomSom||

    Dude thats like totally insane man, LIke seriously.

    www.GetYourAnon.tk

  • Acosmist||

    "Austerity" is such a scary term for what can, in practice, be so minimal.

    But that's what makes it such a great Orwellian name, huh?

  • Spiny Norman||

    They should spend like there's no tomorrow, because there probably isn't.

  • Brandybuck||

    Austerity in Europe? When was this, the 1950s?

  • Sevo||

    Brandybuck| 5.30.13 @ 6:30PM |#
    "Austerity in Europe? When was this, the 1950s?"

    Unfortunately, no. The hand-outs were sell in place prior to WWII.
    The Euros are at least 3 generations from earning their own keep.

  • Paul.||

    In fact, when governments try to reduce the debt by raising taxes, it is likely to result in a deep and pronounced recession, making the fiscal adjustment counterproductive.

    In addition, tax increases (it's been shown) are almost by definition, spending increases. When has any government ever put increased revenues toward paying down a debt?

    Revenue increases almost always go towards existing (long term) programs or as a source for new programs.

  • Barry Zuckerkorn||

    Paying down debt is not sexy. Nobody ever got re-elected for paying down debt. Nobody donates money in return for promises to pay down debt. Girls don't put out for guys who pay down debt.

  • Paul.||

    Girls don't put out for guys who pay down debt.

    It's worse than that, they marry you.

  • Cytotoxic||

    Canada's Liberals were rewarded for paying down debt...but this is Canada.

  • Brandybuck||

    It's like Microsoft never fixing bugs. No one ever buys a bug fix.

  • Gilbert Martin||

    Exactly what European countries have engaged in "austere" spending cuts to begin with?

    Reducing rates of planned spending increases do not count as spending "cuts".

    Only reductions in the absolute total of government spending does.

  • Tony||

    Count in what way? Do you mean only the massive demand-side cuts you advocate will (magically) reduce unemployment, and any incremental step toward them might well be counterproductive?

    Or count as in "I have an ideology about what government should do, and it should be enacted at all times in all places regardless of how many people are unemployed, a metric that doesn't even factor into my values system"?

  • Cytotoxic||

    'Count' as in 'qualify for'. lrn2read

  • Gilbert Martin||

    "Demand-side cuts"?

    Ha! Ha! Ha! Ha!.

    Government doesn't "create" demand, jobs or anything else to begin with.

    Everything government does is nothing more than forced transfer payments. Transfers can never net to any value greater than zero.

    Government has nothing to give anybody or spend on anything except to extract it from the existing store of wealth that had already been created by somebody else.

    YOU will never be the least bit capable of ever proving the case is otherwise.

  • Scarecrow Repair||

    Count as in "count the euros spent" and "count the euros collected" but Krugtoid wouldn't want you to do that, it might embarrass him.

  • Rrabbit||

    Counted as in total government spending.

  • Tony||

    There really is no point to chiming in about the reality of what's happening in the world or the ample empirical information we have about austerity vs. stimulus policy, is there? There is no amount of evidence that will change a libertarian's mind about anything.

  • DarrenM||

    ample empirical information we have about austerity vs. stimulus policy

    By definition, anything that doesn't work is 'austerity'. That's how the game is played in an attempt to prevent rational people from actually thinking about it and to get them to eat the slop they are fed.

  • General Butt Naked||

    C'mon Darren, that's unfair. People like Tony have a very precise definition of "austerity".

    It's any government spending lower than infinity.

  • Tony||

    Austerity has a specific definition, which is provided in this article. The only explanation for why the US has done relatively better in terms of economic growth than Europe is that stimulus works and austerity doesn't.

    We could go back and forth hurling claims at each other, and in five days' time there will no doubt be five more studies debunking Reinhart and Rogoff.

  • General Butt Naked||

    Austerity is a concerted effort to reduce the debt-to-GDP ratio, either through cutting spending, raising taxes, or a mixture of the two.

    So then where are the numbers that back up that this is being done?

  • Tony||

    Are you asking why the debt-to-GDP ratios aren't being significantly affected? Because austerity policy is counterproductive to that end!

  • General Butt Naked||

    Question begging, how original.

  • Cytotoxic||

    What austerity? The austerity in your head doesn't count.

  • ||

    Truly, the cellular austerity in Tony's brain has taken it's toll, proving to him that it's a bad idea.

  • ||

    "ample empirical information we have about austerity vs. stimulus policy"

    I wonder if the lying sack of shit could cite some of this ample evidence?

  • Sevo||

    Tony| 5.30.13 @ 6:46PM |#
    "There really is no point to chiming in about the reality of what's happening in the world..."

    Nor are you capable of doing so, shithead.

  • Hyperion||

    I smell troll.

  • AlmightyJB||

    Austerity? Really?

  • The Last American Hero||

    Spending more year after year is not austerity. Every time they have this debate, the first question by the pro-austerity crowd should be: who has reduced spending from the previous year except for, possibly, Greece?

    The US is better off than Europe because we are the world's reserve currency, so our excessive borrowing and printing of cash hasn't come back to bite us yet.

  • Sevo||

    "Spending more year after year is not austerity. Every time they have this debate, the first question by the pro-austerity crowd should be: who has reduced spending from the previous year except for, possibly, Greece?"

    Since regressives are are all about intent rather than results, the very threat of cutting spending is enough to send shithead and his ilk into flat-spins.
    Regressives are not required to deal with reality, just fantasies.

  • Scruffy Nerfherder||

    This. Call me when Spain's governmental spending isn't 50% more than it was in 2000.

    And there is no quick fix to Europe's financial problems. They took decades to create, minor adjustments are going to achieve nothing of significance when the problems are structural in nature. If I fault the austerity crowd for anything, it's for providing the illusion that there was an easy solution. They should have let the Keynesians run it into the ground first. Discredit them for all time instead of being their scapegoats.

  • Libertarian||

    AUSTERE:

    rigorously self-disciplined and severely moral; ascetic; abstinent: the austere quality of life in the convent.

    grave; sober; solemn; serious: an austere manner.

    without excess, luxury, or ease; simple; limited; severe: an austere life.

    severely simple; without ornament: austere writing.

  • Scruffy Nerfherder||

    You forgot :

    Not paying farm subsidies
    Not paying 2 years of unemployment
    Not providing gold plated pensions
    Not employing an army of overpaid bureacrats

  • seguin||

    No, they should not continue....they should #@@#$@#$ START.

  • Sevo||

    But MERDE!

  • Sam Grove||

    Austerity in a national context is not about raising taxes, it's about reducing consumption and most government spending is pure consumption.

    The claim that various European countries tried austerity is bogus if they did not actually reduce government spending. Such a claim comes from the same kind of people who proclaim to be "progressive".

  • sam the man||

    "There really is no point to chiming in"
    Finally you realize it Tony. Now shut the fuck up.

  • OldMexican||

    Re: Tony

    There really is no point to chiming in about the reality of what's happening in the world or the ample empirical information we have about austerity vs. stimulus policy, is there?


    Depends on what you mean by "austerity", because what the Europeans are engaging in is not true austerity by any stretch of the word. It simply means more taxes.

    There is no amount of evidence that will change a libertarian's mind about anything.


    Are you mad, Tony, or delusional? The Baltic states slashed their governments - REAL cuts - and are growing positive GDP. So did Canada in the 90s and New Zealand, ushering in real growth. And those are the very recent examples; the Harding and Coolidge governments slashed government too and were able to start paying the PRINCIPAL on the national debt, something that was not achieved since 1836(!)

    If you want to continue to argue like an obnoxious drunkard, go ahead and do it somewhere else, because you're becoming quite boring with your lies and the shallowness of your platitudes.

  • Emily Oliver||

    So, it's taken five years of experimenting with a long-ago debunked theory of "expansionary austerity" for these so-called experts to accept something that Keynes said 80 years ago. And how many more suicides will yet result from the ongoing worldwide economic crisis? In order to counteract the effects of the ongoing crisis, maybe it's time politicians and administrators took advice from professional economic crisis specialists with a proven track record of positive results. For example, the Orlando Bisegna Index, specialists in the economic crisis, have developed a program that has helped various counties with debt problems, business failures and unemployment, thus improving the economic condition of families also

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