How well is austerity working? In one picture

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We don't often wade into the austerity vs. stimulus debate, since we're basically a revenue-side organisation and this is about both the revenue and the spending side of government. But this one is too good to miss, from a newish Brookings paper by Jay C. Shambaugh of Georgetown University. Click to enlarge.

That doesn't really need commentary, but here is some from the paper itself anyway:

"Figure 10 shows GDP and government spending in the euro area over the last 3 years. Countries making cuts are shrinking rapidly, enough to cause debt to GDP to rise even with budget cuts. Obviously, these countries may be growing slowly for other reasons, but the evidence of the impact of austerity runs deeper. Recent analysis by the IMF showed that austerity tended to generate GDP contractions (IMF 2010)."

That is pretty damning for the economic policies of a large number of countries.