Paul Krugman is on a rant these days; raging about how "austerity" is causing all of the problems in Europe. But there is scant evidence of any spending cuts at all. Here's a chart below (click to enlarge) that shows that spending has been increasing in nearly every country. Only Greece, Spain, Italy (and slightly in Ireland) is where there is some actual drop in spending but only reversing some large prior increases--all are only reduced back to 2008 levels (2007 for Greece).
You've heard about all the austerity in Britain. Forget it, spending is increasing. Hat tip to Brian Doherty at Reason for the chart reference.
Francois Hollande just won an election in France denouncing "austerity" but you can see from the chart below that French government spending is up, up and away. No austerity in sight. What opium is the French population smoking?? There is a price to be paid however. French Government bond yields are now over 1.8 percentage points greater than German bonds (3.4% ten year French yield vs. 1.6% ten year German yield).
There is certainly no austerity in the US either. Obama is lambasts reduced INCREASES in spending as "cuts" in govt spending. The "Ryan budget" increases federal outlays from roughly $3.6 trillion this year to nearly $4.9 trillion in 2022. But Obama called this a "cut" because he wants to increase spending to $5.8 trillion in 2022. He has called Ryan's attempt at sanity a "radical right wing" tactic and "social Darwinism". Do you think it's campaign season? If American's buy this, then they deserve what they get.
Perhaps the chart is misleading as it's expressed in current prices and based on purchase power parity/
That said, my point is that we live in a time, where in political circles, reductions of spending increases are lambasted as "cuts". Nonsense! Basically politicians never actually cut spending until horrific crises intrude.
Crises are coming as sure as the sun rises in the East.