Thursday, April 26, 2012

Austerity in Two Charts

A couple of recent Krugman columns dealing with austerity are of interest.

this one from yesterday, focuses on the US and shows how public sector employment has fallen under Obama save the census spike; Krugman wants to show that while the U.S. is not the focus of much of the talk about austerity, there are austerity measures being implemented here:

and this one from the day before, focusing on Europe and showing a growth/austerity plot:

The mixed messages in his comments illustrate the difficulty in reading that chart, and one of his readers helpfully points us to this xkcd depiction.  But I think he is showing that greater austerity leads to lower GDP growth, so that more austerity translates to a longer/worse recession.  

1 comment:

  1. I think the better XKCD cartoon is this one:

    If anything, that second chart could also show that lower growth leads to austerity. To say that a different way, when there is less money coming in, governments cannot spend as much.

    The idea of government spending driving growth relies on the Keynesian multiplier theory. Unfortunately, evidence for the theory's existence is dubious at best.