Austerity vs. Stimulus Is Often The Wrong Way to Frame the Debate
In the debate over how to the fix poor economic performances of countries likes the United States, the UK, Italy or France we are often told that governments have the choice between austerity and stimulus. Austerity is mostly defined as government spending cuts and stimulus as spending increases. The problem with this dichotomy is that it ignores that what more government call austerity and what most fiscal adjustments implemented in recent years have looked like is not really spending cuts but rather a mix of small spending cuts with large tax increases on the side.