Austerity

Extracted Attributes

• Purpose

  To bring government revenues closer to expenditures and reduce the amount of borrowing required.

• Criticism

  Can be an ideological weapon of class oppression, leads to increased wealth and income inequality, and has been associated with economic and health failures (e.g., increasing numbers of suicides and reduced access to care).

• Definition

  A set of political-economic policies aiming to reduce government budget deficits.

• Primary Methods

  Spending cuts, tax increases, or a combination of both.

• Types of Measures

  Higher taxes to fund spending, raising taxes while cutting spending, and lower taxes and lower government spending.

• Proponents' Argument

  Demonstrates fiscal discipline to creditors and credit rating agencies, potentially making borrowing easier and cheaper.

• Conditions for Implementation

  Governments finding it difficult to borrow or meet existing obligations; often implemented during times of economic crisis.

• Theoretical Expansionary Effect

  Can stimulate economic growth in specific cases, particularly when the output gap is low or an economy is operating near capacity, if reduced government spending is offset by greater increases in aggregate demand (private consumption, private investment, and exports).

• Long-term Economic Impact (General)

  Can reduce GDP growth if cuts hinder workforce skills (e.g., education spending) or increase business costs (e.g., infrastructure investment), potentially leading to a higher debt-to-GDP ratio.

• Short-term Economic Impact (General)

  Increased unemployment (public and private sectors), reduced household disposable income and consumption, and reduced Gross Domestic Product (GDP) growth.

Timeline

• Origins of modern austerity traced to post-World War I Britain and Italy. (Source: Web Search Results)

  1918-1939

• Argentina adopted severe austerity measures during its economic crisis, largely following the advice of the International Monetary Fund (IMF). (Source: Web Search Results)

  1998-2002

• Austerity measures were implemented in many European countries in the aftermath of the Great Recession, leading to rising unemployment and slower GDP growth. (Source: Summary, Wikipedia)

  Post-2008

• Workers and students in Greece and other European countries demonstrated against government austerity measures. (Source: Web Search Results)

  2009-2011

• The House passed 'The Big Beautiful Bill', endorsed by President Trump, which made TCJA Tax Cuts permanent, abandoning the fiscal austerity principles of the Doge agenda and projected to add trillions to the US National Debt. (Source: Related Document)

  Undated (Post-2017 US Fiscal Policy)

Austerity

In economic policy, austerity is a set of political-economic policies that aim to reduce government budget deficits through spending cuts, tax increases, or a combination of both. There are three primary types of austerity measures: higher taxes to fund spending, raising taxes while cutting spending, and lower taxes and lower government spending. Austerity measures are often used by governments that find it difficult to borrow or meet their existing obligations to pay back loans. The measures are meant to reduce the budget deficit by bringing government revenues closer to expenditures. Proponents of these measures state that this reduces the amount of borrowing required and may also demonstrate a government's fiscal discipline to creditors and credit rating agencies and make borrowing easier and cheaper as a result. In most macroeconomic models, austerity policies which reduce government spending lead to increased unemployment in the short term. These reductions in employment usually occur directly in the public sector and indirectly in the private sector. Where austerity policies are enacted using tax increases, these can reduce consumption by cutting household disposable income. Reduced government spending can reduce gross domestic product (GDP) growth in the short term as government expenditure is itself a component of GDP. In the longer term, reduced government spending can reduce GDP growth if, for example, cuts to education spending leave a country's workforce less able to do high-skilled jobs or if cuts to infrastructure investment impose greater costs on business than they saved through lower taxes. In both cases, if reduced government spending leads to reduced GDP growth, austerity may lead to a higher debt-to-GDP ratio than the alternative of the government running a higher budget deficit. In the aftermath of the Great Recession, austerity measures in many European countries were followed by rising unemployment and slower GDP growth. The result was increased debt-to-GDP ratios despite reductions in budget deficits. Theoretically in some cases, particularly when the output gap is low, austerity can have the opposite effect and stimulate economic growth. For example, when an economy is operating at or near capacity, higher short-term deficit spending (stimulus) can cause interest rates to rise, resulting in a reduction in private investment, which in turn reduces economic growth. Where there is excess capacity, the stimulus can result in an increase in employment and output. Alberto Alesina, Carlo Favero, and Francesco Giavazzi argue that austerity can be expansionary in situations where government reduction in spending is offset by greater increases in aggregate demand (private consumption, private investment, and exports).

Web Search Results

• Austerity - Wikipedia

  In economic policy, austerity is a set of political-economic policies that aim to reduce government budget deficits through spending cuts, tax increases, or a combination of both. There are three primary types of austerity measures: higher taxes to fund spending, raising taxes while cutting spending, and lower taxes and lower government spending. Austerity measures are often used by governments that find it difficult to borrow or meet their existing obligations to pay back loans. The measures [...] In many situations, austerity programs are implemented by countries that were previously under dictatorial regimes, leading to criticism that citizens are forced to repay the debts of their oppressors. In 2009, 2010, and 2011, workers and students in Greece and other European countries demonstrated against cuts to pensions, public services, and education spending as a result of government austerity measures. [...] Clara E. Mattei, assistant professor of economics at the New School for Social Research, posits that austerity is less of a means to "fix the economy" and is more of an ideological weapon of class oppression wielded by economic and political elites in order to suppress revolts and unrest by the working class public and close off any alternatives to the capitalist system. She traces the origins of modern austerity to post-World War I Britain and Italy "Fascist Italy (1922–1943)"), when it served

• Austerity | Economics, Government Spending & Social Policy

  Britannica Money Nikolay Bukharin Inflation, interest rates, and economic policy John Stuart Mill # austerity Nikolay Bukharin Inflation, interest rates, and economic policy John Stuart Mill Greece austerity, a set of economic policies, usually consisting of tax increases, spending cuts, or a combination of the two, used by governments to reduce budget deficits. [...] Historically, austerity measures have usually been implemented during times of economic crisis, when they are easier for governments to justify to their electorates and when they are often necessary to maintain a country’s credit worthiness in the eyes of lenders. During Argentina’s economic crisis in 1998–2002, the country adopted severe austerity measures, largely following the advice of its major creditor, the International Monetary Fund (IMF); they included cuts in government pensions and [...] Austerity measures can in principle be used at any time when there is concern about government expenditures exceeding government revenues. Often, however, governments delay resorting to such measures because they are usually politically unpopular. Instead, governments tend to rely on other means—for example, deficit financing, which involves borrowing from financial markets—to mitigate budget deficits in the short run, a decision that usually necessitates the adoption of harsher austerity

• Austerity: The History of a Dangerous Idea | Political Science

  with increases in wealth and income inequality. Austerity demolishes the conventional wisdom, marshaling an army of facts to demand that we austerity for what it is, and what it costs us. [...] That burden now takes the form of a global turn to austerity, the policy of reducing domestic wages and prices to restore competitiveness and balance the budget. The problem, according to political economist Mark Blyth, is that austerity is a very dangerous idea. First of all, it doesn't work. As the past four years and countless historical examples from the last 100 years show, while it makes sense for any one state to try and cut its way to growth, it simply cannot work when all states try it [...] # Political Science ## Secondary Navigation Navigation ## Site Navigation ## Sub Navigation # Austerity: The History of a Dangerous Idea Publication Selected as a Financial Times Best Book of 2013

• AUSTERITY | definition in the Cambridge English Dictionary

  ## More meanings of austerity Word of the Day jumble sale Your browser doesn't support HTML5 audio Your browser doesn't support HTML5 audio a sale of a mixed collection of things that people no longer want, especially in order to make money for an organization Up north and down south: prepositions for expressing directions Blog Up north and down south: prepositions for expressing directions <p>tadpole water New Words tadpole water © Cambridge University Press & Assessment 2025

• Austerity: a failed experiment on the people of Europe - PMC

  For many months, the political and financial aspects of the crisis have filled the headlines. However, behind those headlines, there are many individual human stories that remain untold. They include people with chronic diseases unable to access life-sustaining medicines, persons with rare diseases who are losing income support and forced to care for themselves, and those whose hopes of a better life in the future have been dashed see no alternative but to commit suicide. So far, the discussion [...] References ---------- [...] recovery in the UK was halted once austerity measures hit. However, austerity has been not only an economic failure, but also a health failure, with increasing numbers of suicides and, where cuts in health budgets are being imposed, increasing numbers of people being unable to access care. Yet their stories remain largely untold. Here, we argue that there is an alternative to austerity, but that ideology is triumphing over evidence. Our paper was written to contribute to discussions among

• Instance Of

  Q4167410

Austerity is a set of political-economic policies that aim to reduce government budget deficits through spending cuts, tax increases, or a combination of both. There are three primary types of austerity measures: higher taxes to fund spending, raising taxes while cutting spending, and lower taxes and lower government spending. Austerity measures are often used by governments that find it difficult to borrow or meet their existing obligations to pay back loans. The measures are meant to reduce the budget deficit by bringing government revenues closer to expenditures. Proponents of these measures state that this reduces the amount of borrowing required and may also demonstrate a government's fiscal discipline to creditors and credit rating agencies and make borrowing easier and cheaper as a result. In most macroeconomic models, austerity policies which reduce government spending lead to increased unemployment in the short term. These reductions in employment usually occur directly in the public sector and indirectly in the private sector. Where austerity policies are enacted using tax increases, these can reduce consumption by cutting household disposable income. Reduced government spending can reduce GDP growth in the short term as government expenditure is itself a component of GDP. In the longer term, reduced government spending can reduce GDP growth if, for example, cuts to education spending leave a country's workforce less able to do high-skilled jobs or if cuts to infrastructure investment impose greater costs on business than they saved through lower taxes. In both cases, if reduced government spending leads to reduced GDP growth, austerity may lead to a higher debt-to-GDP ratio than the alternative of the government running a higher budget deficit. In the aftermath of the Great Recession, austerity measures in many European countries were followed by rising unemployment and slower GDP growth. The result was increased debt-to-GDP ratios despite reductions in budget deficits. Theoretically in some cases, particularly when the output gap is low, austerity can have the opposite effect and stimulate economic growth. For example, when an economy is operating at or near capacity, higher short-term deficit spending (stimulus) can cause interest rates to rise, resulting in a reduction in private investment, which in turn reduces economic growth. Where there is excess capacity, the stimulus can result in an increase in employment and output. Alberto Alesina, Carlo Favero, and Francesco Giavazzi argue that austerity can be expansionary in situations where government reduction in spending is offset by greater increases in aggregate demand (private consumption, private investment, and exports).