The Facts Are In: Austerity Politics Doesn’t Work
From England's double-dip recession to Portugal's spiking unemployment, there is now conclusive evidence of the complete failure of austerity.
The idea that rational thinking should govern political decision making in America dates back to our very founding. “Facts are stubborn things,” John Adams said, “and whatever may be our wishes, our inclinations, or the dictates of our passion, they cannot alter the state of facts and evidence.”
Oh, John Adams, where are you when we need you? Facts have been buried in a political era in which partisan ideology overrides reason. And while the Republican Party has embraced fact-free governance as its personal brand, Democrats are not entirely innocent either.
Take the case of “austerity politics.” Persistent, despite the facts. There is now conclusive evidence, both practical and theoretical, of the complete failure of austerity politics.
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First was the United Kingdom, the practical test case for austerity. In 2010, faced with a recession similar to those gripping most other industrialized nations, Britain’s conservative government instituted a series of austerity measures to dramatically cut spending and taxes. Parts of the U.K. government were slashed by upwards of 30 percent.
The result? Utter and unquestionable failure. The deficit remained high while the country suffered through a double-dip recession. Austerity shaved 6 percent from the country’s GDP over the last three years. Major credit agencies downgraded Britain’s AAA rating for the first time in generations. The Fitch ratings agency blamed weak growth performance, “partly due to … public sector deleveraging.”
In other words: austerity. The International Monetary Fund has been pressuring the United Kingdom to back off austerity for its own good and the good of the global economy—which is funny because it was the International Monetary Fund that pressed for austerity measures in the first place.
Take another example, Portugal—which was forced to slash spending drastically in order to qualify for an IMF and EU bailout. The result? The Portuguese economy worsened, with the nation’s debt-to-GDP ratio going up not because its deficit increased but because the economy contracted. The nation’s already-painful 13 percent unemployment rate grew to more than 16 percent. And there are similar examples of austerity’s failures from Ireland to Italy to Spain.
Okay, mumble conservative economists, a few countries may have stumbled but the theory of austerity is still sound. Around the same time Britain launched its austerity experiment, two American professors—Carmen Reinhart and Kenneth Rogoff—published a study arguing that economic growth suffers when a nation’s public debt level reaches 90 percent of GDP. Reinhart and Rogoff’s study became the calling card for pushing austerity politics in the United States and abroad. And then, in April 2013, a graduate student at the University of Massachusetts at Amherst found a simple spreadsheet error that, when corrected, entirely ruined Reinhart and Rogoff’s theory.
Suddenly, the research used to back the case for austerity was 100 percent disproven.
And yet, conservatives—as well as a few too many spineless Democrats—continue to assert that austerity makes for good economics, in spite of the fact that real-world evidence and theoretical science now decisively prove otherwise. In Spain and Greece and beyond, citizens have been mounting protests against a backdrop of skyrocketing rates of suicide and devastating unemployment wrought by austerity measures. And yet these mass protests receive far less attention than the outmoded assertions by the monied elites. In their case, whether there’s evidentiary support for austerity or not is irrelevant—the powers that be simply seek convenient window dressing on their ideology that insists we should cut taxes and spending in good economic times and in bad, that basically there is never a case for anything other than severe austerity. And so while the facts behind austerity politics have collapsed, the ideology remains—as hollow and destructive as ever.