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If the critics of austerity can't find contemporary examples of where it's been successfully implemented, they can look at history. Research consistently shows that successful attempts to reduce government debt ratios follow a single-minded devotion to actually cutting spending rather than just talking about it.

In a 2009 paper, Harvard economists Alberto Alesina and Silvia Ardagna looked at 107 examples in developed countries over 30 years and found that successful austerity packages -- defined by a reduction in debt to GDP greater than 4.5% after three years -- resulted from making spending cuts without tax increases. They also found that this form of austerity accompanied by the "right policies" (easy monetary policy, liberalization of goods and labor markets, and other structural reforms) is more likely associated with economic expansions rather than with recessions. This makes intuitive sense: Austerity based on spending cuts signals that a country is serious about getting its fiscal house in order in a way that taxing and spending certainly does not.

On the other hand, they found that the so-called balanced approach -- typically a mix of spending cuts and tax increases -- is a recipe for failure.

Alfred_E._Neuman wrote:I think the reason austerity works where austerity+tax increase fails is that governments will ALWAYS find a way to spend whatever money they take from the citizens. Any extra revenue from the tax increase is more than offset by economic slowdown associated with the increase and the extra cash is pissed away by the government long before it could ever be applied to debt.