Austerity has been an even bigger disaster than we thought

There might be a worse idea than cutting spending during a depression, but I doubt it.

The fundamental economic question of the last five years has been a simple one: how much does stimulus work? The answer, according to a new paper by Daniel Riera-Crichton, Carlos Vegh, and Guillermo Vuletin, is much more than we previously thought. And that means austerity has also hurt more than we thought — so much so that it might even be self-defeating.

By Matt O’Brien

Full Story: http://www.washingtonpost.com/blogs/wonkblog/wp/2014/10/07/austerity-has-been-an-even-bigger-disaster-than-we-thought/