Pain Without Gain - NYTimes.com

Now the results are in — and they’re exactly what three generations’ worth of economic analysis and all the lessons of history should have told you would happen. The confidence fairy has failed to show up: none of the countries slashing spending have seen the predicted private-sector surge. Instead, the depressing effects of fiscal austerity have been reinforced by falling private spending.

 

Furthermore, bond markets keep refusing to cooperate. Even austerity’s star pupils, countries that, like Portugal and Ireland, have done everything that was demanded of them, still face sky-high borrowing costs. Why? Because spending cuts have deeply depressed their economies, undermining their tax bases to such an extent that the ratio of debt to G.D.P., the standard indicator of fiscal progress, is getting worse rather than better.

 

Meanwhile, countries that didn’t jump on the austerity train — most notably, Japan and the United States — continue to have very low borrowing costs, defying the dire predictions of fiscal hawks.