Austerity: When It Works and When It Doesn't

Fiscal austerity is a highly controversial topic, with opponents arguing that it can trigger downward growth spirals and become self-defeating. This book argues that there is not one type of austerity but many and assesses the relative effectiveness of tax increases and spending cuts at reducing debt. It shows that spending cuts have much smaller costs in terms of output losses than tax increases and are more successful at reducing the growth of debt. Austerity also shows that austerity is not necessarily the kiss of death for political careers and provides new insights into the recent cases of European austerity after the financial crisis.

Format: Hardback
Length: 296 pages
Publication date: 19 February 2019
Publisher: Princeton University Press

Fiscal austerity is a highly contentious topic. Opponents contend that it may lead to downward growth spirals and ultimately be self-defeating. Supporters argue that addressing budget deficits requires a relentless and unwavering commitment, regardless of the costs involved. In this comprehensive book, three esteemed policy experts delve into the political noise to dispel the notion that there is a singular type of austerity. They examine thousands of fiscal measures implemented by sixteen advanced economies since the late 1970s, aiming to assess the relative effectiveness of tax increases and spending cuts in reducing debt.

The findings of Austerity are enlightening. The study reveals that spending cuts have significantly lower costs in terms of output losses compared to tax increases. In certain instances, particularly during expansionary austerity, spending cuts can even lead to output gains. Moreover, the authors demonstrate that austerity is not necessarily a career-ender for political leaders, as is often perceived. They offer fresh insights into the recent cases of European austerity following the financial crisis.

By grounding their analysis in data rather than ideology, the authors provide much-needed clarity to a complex subject. Austerity serves as a practical guide, charting a sensible approach based on rigorous data analysis. This book is a valuable resource for policymakers, economists, and anyone interested in understanding the dynamics of fiscal policy and its impact on economic outcomes.

Weight: 592g
Dimension: 246 x 173 x 26 (mm)
ISBN-13: 9780691172217