As we brought to your attention the other day, austerity as a policy is not working. Economist Christina D. Romer writes, “The result is that austerity is uniquely destructive right now.”Romer sites high unemployment in Europe and long with a negative GDP proves that Europe’s austerity program is not working. Romer writes of a different approach:
The core of a more sensible approach is to pass the needed budget measures now, but to phase in the actual tax increases and spending cuts only gradually — as economies recover. To use economists’ terminology, the measures should be backloaded.They should also be specific — no more deficit targets without specifying how they’ll be achieved. Instead, lay out right now whose taxes will be raised and what spending will be cut. And specify when the measures will take effect — either along a set schedule, or tied explicitly to indicators of economic recovery.