A number of folks are looking at the latest IMF paper (here) as a startling admission of the failure of Austerity:
“Consider it a mea culpa submerged in a deep pool of calculus and regression analysis: The International Monetary Fund’s top economist today acknowledged that the fund blew its forecasts for Greece and other European economies because it did not fully understand how government austerity efforts would undermine economic growth.
The new and highly technical paper looks again at the issue of fiscal multipliers – the impact that a rise or fall in government spending or tax collection has on a country’s economic output . . .”
The math is quite simple: Simultaneously choke off government spending and raise taxes, and you crimp the economy reduce job creation and hurt tax revenues — creating an even bigger deficit.
To fix a chronic deficit, you need to make the economy grow faster . . .
This piece is cross-posted from The Big Picture with permission.
4 Responses to “IMF Austerity Mea Culpa?”
so… does this mean they will call mr.Krugman moving forward?
Let's hope they will listen to Prof. Krugman and they will start to analyze how to set a proper
x-rate floating regime too in a free global economy !!
(for istance: is it still acceptable a non completely free floating currency regime for renminbi ?)
" it did not fully understand how government austerity efforts would undermine economic growth" –ROTOFLO.
Obama’s proposed terms of surrender into his fireplace. Only continuous efforts by progressives can prevent the disaster of austerity and the professional writing service betrayal of the safety net.