The false prophets of growth

The last decade was proof austerity doesn't work — has anyone paid attention?

An eagle and a graph.
(Image credit: Illustrated | iStock, The Roosevelt Institute)

In 2009-10, when most of the world was still at the depths of the Great Recession, two economics papers quickly swept through the policy elite in both Europe and the United States — one by Carmen Reinhart and Ken Rogoff, and the other by Alberto Alesina and Silvia Ardagna. They both purported to show the benefits of austerity policies — basically, raising taxes and cutting government spending to cut the national debt. Reinhart and Rogoff showed that in several countries, growth seemingly slowed markedly when the national debt-to-GDP ratio topped 90 percent, while the other two suggested that austerity, especially cutting spending, would increase growth.

At the time, they were swimming against the tide of policy — the U.S. had just passed the bank bailout and the Recovery Act stimulus. However, their arguments quickly got a hearing. Peter Coy of BusinessWeek wrote: "Alberto Alesina is a new favourite among fiscal hawks … In April (2010) in Madrid, he told the European Union's economic and finance ministers that 'large, credible and decisive' spending cuts to rescue budget deficits have frequently been followed by economic growth." The Washington Post editorial board cited the 90 percent figure in 2013 as a reason to stay the course with austerity. Rogoff himself wrote in 2012 that "very high debt levels of 90 percent of GDP are a long-term secular drag on economic growth that often lasts for two decades or more."

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Ryan Cooper

Ryan Cooper is a national correspondent at His work has appeared in the Washington Monthly, The New Republic, and the Washington Post.