Thursday, June 6, 2013

Austerity Hasn't Worked In Europe Because It Hasn't Been Tried???

The Senate Budget Committee is holding hearing on budget policy. The economy in Europe has been struggling to recover from recession, and austerity is often cited as one the reasons for the weak recovery.  That has made some senators concerned that fiscal policies in the US might have similar results.  An economist from the conservative Heritage Foundation was invited to give his view on the subject.  He presented data which indicated that there has been very little austerity in Europe and that most of the fiscal contraction has been in the form of tax increases.  Austerity can't be blamed for the economic problems in Europe according to his analysis (which depended on data from the OECD).  Moreover,  a more effective austerity policy would be heavier on spending cuts than on tax increases which conservatives believe to be bad for economic growth.

There are many problems with the statistics that were used to reach the conclusion that austerity hasn't really been tried in Europe, and that it was weak on spending cuts and heavy on tax increases.  One Senator (link to video in article)  presented data from OECD which showed that spending cuts were more substantial than tax increases, and he suggested that the Senate was being intentionally misled by the Heritage Foundation's economist.  His measures of austerity in Europe also conflicts with a report by OECD which comes to very different conclusions than those made by the Heritage Foundation's economist.  The OECD report provides an austerity measure for each country.

Republicans have always relied upon economists from conservative think tanks to support their policies.  In order for that to be effective the research must be credible.  In recent years the research coming from conservative think tanks has not been credible.  It has now gotten to the point where even journalists no longer accept their findings.

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