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Washington, D.C., June 28, 2013 - Most European countries have cut neither spending nor taxes. But European governments that have cut both spending and taxes as part of their austerity programs have higher rates of economic growth than their neighbors. So, why are the news media and politicians claiming “savage” budget cuts are leading Europe to economic ruin? They are looking at the data in the wrong way, says a new report by CEI’s Matthew Melchiorre .
Not all European countries have implemented austerity programs at the same time, so merely selecting a base year for measuring changes in spending, taxation, and growth won’t work. CEI’s new OnPoint, The True Story of European Austerity; Cutting Taxes and Spending Leads to Renewed Growth , measures austerity and its effects from the time austerity officially began in each country, with very different results from reports that have been cited widely in the media.
“European countries that have reduced the economic footprint of their public sectors have more prosperous economies,” said Melchiorre.
“The United States, beset by high levels of unemployment, discouraged workers, and economic uncertainty, is on pace to increase its spending and taxes through the end of this decade,” Melchiorre added. “Washington ought to take a lesson from Europe. When recession hits, the public sector cannot be shielded from the austerity necessary for the economy to return to sustainable growth.”
> View the CEI OnPoint, The True Story of European Austerity; Cutting Taxes and Spending Leads to Renewed Growth