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Let’s Get Fiscal

It may be true that there is no gain without pain, but there can be pain without gain – a lesson that Western populations have been learning the hard way since at least 2012. Years of fiscal austerity in the US, Europe, and Japan have achieved nothing, and it is time for governments to start spending again.

LONDON – Everyone knows there is no gain without pain. But there can be pain without gain – a lesson that Western populations have been learning the hard way since at least 2012. With years of fiscal austerity in the United States, Europe, and Japan having achieved nothing, it is time for governments to start spending again.

The proposal will be met with outrage from many governments, especially, but not exclusively, Germany’s, and will be dismissed by the many political candidates who treat sovereign debt, built up by the incumbents they are seeking to depose, as the devil’s work. But beyond ideology and self-interest lies a simple and unavoidable truth: austerity is not working.

Japanese Prime Minister Shinzo Abe reluctantly acknowledged austerity’s failure when he announced on June 1 that his government would postpone a planned increase in the country’s consumption tax. Far from helping to control Japan’s budget deficit and huge public debt, the tax hike probably would have reduced revenues. After all, the previous hike, implemented in April 2014, quickly drove the economy back into recession.

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