The Paradox of Fiscal Austerity: How Cutting Deficits Saved the Modern World

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If governments followed the optimal fiscal policy path, surpluses in good times would counter necessary deficits during economic downturns, leading to worldwide balance. The world, however, has chosen to go in a different direction in recent decades, avoiding thrift in light of a decidedly more indebted future. When financial crises kicked off a global recession in 2008, the spotlight placed on countries fiscal conditions put pressure on policymakers around the globe to find a way to slow the growth of deficits and debt by imposing fiscal consolidations (or, more simply, austerity). How have these policies fared across the developed world Were they even necessary to begin with This book examines the many factors that have contributed to the success (or failure) of such policies, including timing, magnitude, accompanying policies, composition, and more, while explaining the economic rationale behind their choices.

Reviews

"In The Paradox of Fiscal Austerity, Justin Velez-Hagan brilliantly discusses the effects of government deficits and public debt at a time when we need it the most. His idea of a fiscal paradox may seem counterintuitive to some, but is right on target. A must-read for anyone who cares about the fiscal health and wellbeing of our nation."--Luis G. Fortuo, Former Governor of Puerto Rico
"With global debt rising to unprecedented levels, it is now more important than ever for policymakers to understand the implications of their fiscal and monetary policy choices. In The Paradox of Fiscal Austerity, Vlez-Hagan expertly navigates the various fiscal policies within a country's toolbox, noting the distinct effects on future economic growth."--Daniel Lacalle, Chief Economist at Tressis and author of Freedom Or Equality

Author Bio

Justin Vlez-Hagan is economic policy researcher at University of Maryland, Baltimore County.