Interesting read over at The Washington Post that looks at why the elections in France and Greece turned out the way they did, because austerity hasn’t worked. Brad Plumer looks at a paper by the IMF that examines 173 examples of austerity and what followed.
Washington Post:
In a recent paper for the International Monetary Fund, Laurence Ball, Daniel Leigh and Prakash Loungani looked at 173 episodes of fiscal austerity over the past 30 years. These were countries that, for one reason or another, cut spending or raised taxes to shrink their budget deficits. And the results were typically painful: Austerity, the IMF paper found, “lowers incomes in the short term, with wage-earners taking more of a hit than others; it also raises unemployment, particularly long-term unemployment.”Specifically, an austerity program that curbs the deficit by 1 percent of GDP reduces real incomes by about 0.6 percent and raises unemployment by almost 0.5 percentage points. What’s more, the IMF found, the losses are twice as big when the central bank can’t or won’t cut interest rates (that’s a good description of what Europe’s central bank is doing right now). Income and employment don’t fully recover even five years after the austerity program is enacted.
Now go read the rest: Why is Austerity so Unpopular
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