The Unassuming Economist

Europeans are rebelling against austerity. That’s the read on Sunday’s elections in Greece and France. But why do voters loathe austerity so much? Perhaps because, as economists have found, efforts to rein in budget deficits can take a wrenching toll on living standards, especially in a recession.

In a recent paper for the International Monetary Fund, Laurence Ball, Daniel Leigh and Prakash Loungani looked at 173 episodes of fiscal austerity over the past 30 years. These were countries that, for one reason or another, cut spending and hiked taxes in order to shrink their budget deficits. And the results were typically painful: Austerity, the IMF found, “lowers incomes in the short term, with wage-earners taking more of a hit than others; it also raises unemployment, particularly long-term unemployment.” Read the full story on the Washington Post.