Tax Hikes Are A Form Of Austerity

The fact that Barack Obama entered office just as the economy was bottoming out has caused a lot of ideas about macroeconomic stabilization policy to become highly correlated with ideas about generous welfare states versus low taxes. The fact that the new Spanish government’s austerity plan includes lots of tax increases serves, I hope as a reminder that the stimulus/austerity debate is basically orthagonal to the services/taxes debate.