Not quite a century ago, America had the Great Depression. The government at first tried to let the free market fix everything, used a tiny amount of stimulus, imposed austerity measures, and made things even worse.  A subsequent administration used huge amounts of stimulus, which helped the economy to recover and made it possible for the United States to avoid being taken over by the German Empire later on. Only a few fringe theorists think that we should have stuck with austerity in that case.

A decade or so ago, Japan had a pretty severe recession. The government decided to impose strict financial discipline and imposed drastic austerity measures. Japan’s economy has not yet gotten back to where it was before the recession, even after all these years, and independent economists have pretty much reached a consensus that austerity didn’t work in that case.

A while back, China had no particular economic issues but DID have huge honkin’ political issues. The government used unnecessary stimulus to distract the populace and is now realizing that they are about to have a recession. Neither austerity nor stimulus should have been used in that case.

A year or four ago, America and Europe got whacked with the Great Recession. America hedged its bets and went with a small dose of government stimulus, and the EU went with drastic austerity measures. Today, America’s economy is slowly (very slowly) recovering while Europe’s is circling the drain. Once again, independent economists are saying that the Yanks’ stimulus approach helped to stop the bleeding, and  the Europeans’ austerity measures have made a bad situation even worse.

So why, despite its lousy track record, do so many of us still think that austerity is a good tool to use in fixing our current financial mess?

Mr. B & C