Had the United States gone fully over the so-called “fiscal cliff,” it would have enacted policies that led to more austerity than the European debt crisis has caused across the Atlantic. Congress averted much of the fiscal cliff this week, while punting other parts to deadlines later in the year, but even without a full ride over the ledge, the country is on pace to experience more austerity than most of Europe.
Altogether, the U.S. will have about $348 billion in austerity measures this year — roughly $200 billion from spending cuts, $125 billion from the end of the payroll tax cut, and $24 billion in taxes from Obamacare. That amounts to austerity totaling 2.1 percent of GDP, a bigger austerity package than Britain, Germany, or Spain has enacted, as the Washington Post’s Brad Plumer shows in this chart:
Austerity plunged Great Britain and much of Europe into a double-dip recession as it drove unemployment through the roof and caused mass protests in cities across the continent. Meanwhile, the stimulus act signed by President Obama in 2009 led to economic expansion that pulled the U.S. out of the recession. Congressional Republicans blocked further efforts to stimulate the economy. And during the fiscal cliff debate, neither Democrats nor Republicans sought to replace the payroll tax cut with a similar provision, even as the Congressional Budget Office said it was the tax provision that would hurt economic growth the most.