Daniel J. Mitchell

It’s remarkable to read that European politicians are agitating to spend more money, supposedly to make up for “spending cuts” and austerity.

To put it mildly, their Keynesian-based arguments reflect a reality-optional understanding of recent fiscal policy on the other side of the Atlantic.

Here’s some of what Leonid Bershidsky wrote for Bloomberg.

Just as France’s and Italy’s poor economic results prompt the leaders of the euro area’s second and third biggest economies to step up their fight against fiscal austerity, it might be appropriate to ask whether they even know what that is.

An excellent question. As I’ve already explained, austerity is a catch-all phrase that includes bad policy (higher taxes) and good policy (spending restraint).

But with a few notable exceptions, European nations have been choosing the wrong kind of austerity (even though Paul Krugman doesn’t seem to know the difference).

As a result, the real problem of bloated government keeps getting worse.

Government spending in the European Union, and in the euro zone in particular, is now significantly higher than before the 2008 financial crisis. …Among the 28 EU members, public spending reached 49 percent of gross domestic product in 2013, 3.5 percentage points more than in 2007.

Here’s a chart showing how the burden of government spending has become more onerous since 2007.

As you can see, all the big nations of Western Europe have moved in the wrong direction.

Only a small handful of countries in Eastern Europe that have trimmed the size of the public sector.


Daniel J. Mitchell

Daniel J. Mitchell is a top expert on tax reform and supply-side tax policy at the Cato Institute.