Austerity Facts?

Russ Roberts wants the facts:

Which nations in Europe have slashed government spending? I suppose “slash” is an ambiguous term but when you write  that the experiment has been tried, don’t you have to show that spending has at least been cut or reduced, right? Maybe some European states have slashed the growth rate in government spending? Is that what he means? If so, shouldn’t different words be used? And either way, should there be some facts on this “experiment.” The word implies something scientific. But it all appears to be going on in the mind of the writer rather than in the real world

I’d like some facts. I have seen many articles on austerity. I can’t remember seeing any that suggest that government spending in any European country has actually fallen. Yes, there is talk of spending cuts or cuts in growth rates. But I’d like to see the data that shows the cuts have actually been implemented.

Me too. Where should I look?

Author: Will Wilkinson

Vice President for Research at the Niskanen Center

4 thoughts

  1. Well, it’s quite easy. The IMF World Economic Outlook database has the data you want to look at. In Spain, spending has fallen about 3% from the peak in 2009. But if you compare 2011 with 2007, it has risen more than 10%.

    1. The 2011 IMF data are staff projections, not actual data. Another source: OECD data are bit more up-to-date, especially if you look at general government final consumption expenditures, rather than total spending (which includes transfers). Greece has seen drastic cuts in government spending in current-euro terms & as a percentage of GDP. Spain & Italy, not so much. Estonia looks like the only other country to cut significantly in 2009-2010.

  2. I think you ask the wrong question if you are looking for absolute numbers. Instead you should look at what governments spending actually is compared to what government spending should have been if no action was taken.
    The latter means in a crisis governments spend more (on unemployment benefits, for instance) and get less revenue (since more people are unemployed), hence running deficits (the so-called automatic stabilizers).
    So it is appropiate to call _relative_ spending cuts ‘austerity measures’. Paul Krugman has a nice graph about this:

  3. David Clayton – A rank amateur economist, David Clayton pokes fun at better-healed economists, pundits who make misleading assertions and questionable arguments, Philadelphia Phillies fans, and people who speak about themselves in the third person. With little experience, aptitude, or interest in rigorous economic analysis, Clayton pilf... borrows extensively from others to formulate logical arguments in support of his radically centrist views. On those occasions when he is found to be demonstrably wrong, he will curl up like a potato bug for a while before emerging slightly wiser, having read everything he could find on the subject in question.
    David Clayton says:

    Okay, I haven’t checked these figures, but is Roberts just playing dumb here or what? Take UK budget and population numbers from, GDP deflator figures from, then subtract interest payments to get real spending per capita. Change from previous year:

    2007: +1.8%
    2008: +2.0%
    2009: +6.1%
    2010: +3.1%
    2011: -1.3%
    2012: -0.6% (projection)

    Use CPI and it looks like this:
    2007: +1.8%
    2008: +1.5%
    2009: +5.6%
    2010: +2.6%
    2011: -3.3%
    2012: -1.7% (projected)

    Unemployment rate since mid 2011: up half a percent.

    So that’s one. I’m guessing Russ hasn’t looked at Ireland, either.

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