The media insists on describing recent election results in Europe as a blow to "austerity," when in fact Europe's recent policies are anything but. Government spending has continued to rise across much of Europe, and even those countries that have made small cuts have not reduced government spending to pre-recession levels. Some Keynesians might believe that these policies are draconian relative to the massive spending that should have happened during a recession, but that is shifting the austerity goalposts.
Veronique de Rugy at National Review Online points to the graph above, and also points out that "whenever cuts took place, they were always overwhelmed by large counterproductive tax increases." Higher taxes on the "rich" have led to uniform misery in Europe--and to political extremism among disenchanted voters.That is the real failure of European policy, and the lesson most relevant to Americans as we head to the polls to choose between an incumbent who wants to raise taxes and one who wants to reform them.
One thing the American presidential election is not about is a choice between austerity and spending. Both candidates propose to increase spending, though the President Barack Obama's budget implies economic disaster and the collapse of government programs in the long run. But when Gov. Mitt Romney agrees that Congress should continue subsidizing the interest on student loans, and other fiscal extravagances, the idea that this is a referendum on "austerity" is rather laughable.