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Austerity Works: It's Time to Give It a Try
John Lott & Sherwin Lott, RealClearMarkets Austerity or growth, is that the choice facing Americans and others around the world? The debate never seems to abate. European Union finance ministers last week gave Spain permission to delay cutting some government spending and reducing its deficit, though many such as The Economist magazine fear that even the cuts that will be made go too far. A similar decision may soon have to be made for Greece. Even though the pro-bailout parties won the June Parliamentary election, they too are asking for a two-year delay in cutting spending and reducing their budget deficit. The Obama administration has put increasing pressure on German Chancellor Angela Merkel to ease up on Germany's austerity prescription. President Obama continually touts more government spending as the cure, and derided Republican "let's cut more" spending strategy as the cause of Europe's economic problems. Last month, German Finance Minister Wolfgang Schäuble was having none of it, telling Obama to fix the U.S. deficit before giving Europe advice: "Herr Obama should above all deal with the reduction of the American deficit. That is higher than that in the euro zone." Paul Krugman has challenged Obama's critics: "We have actually had a massive unethical human experiment in austerity doctrine . . . there has been a very depressing effect on the economy. Where is the evidence that this other view [austerity] is at all right?" So what is the evidence? Did the countries with the biggest stimulus programs weather the storm better than countries that reined in spending? Read More