Most of the time “austerity” is a misleading word and more precise concepts — readily intelligible I might add — are available. There really are some times when we should relabel austerity as “mostly tax increases,” but many people are reluctant to do so.Read it at Marginal Revolution
Economic growth is not contractionary, and other confusions about stimulus and spending
By Tyler Cowen
Recently I’ve been devoting significant space to the inconsistencies in how the term austerity is being used (See What is Austerity? and The Austerity Experiment Failed Without Really Starting). It’s great to see Tyler attacking this issue as well and attempting to clear up much of the confusion. One other highlight from his post is that:
when judging whether fiscal policy is contractionary or expansionary in macroeconomic terms, we do not automatically adjust for percentage of gdp and inflation. Start instead by looking at nominal government spending, and then perhaps take a glance at nominal gdp or related measures. The theory, after all, is about nominal values, most of all in the short run.My second post above shows government revenue and spending, in nominal terms, for European countries over the past decade. Many countries, most notably France and the UK, have not reduced spending but have increased revenue.