As we’ve all heard so often from the Aus­trian School adher­ents, the proper behav­ior for gov­ern­ment in times of eco­nomic down­turns is to reduce spend­ing to match the lower tax rev­enues result­ing from the lower amounts of eco­nomic activity.

Amer­i­can Repub­li­cans, of course, dou­ble down on this by sug­gest­ing that we should not only reduce spend­ing to match the lower tax rev­enues, but that we should also lower tax rates to fur­ther reduce tax rev­enues, and reduce spend­ing even fur­ther to match that lower amount of tax rev­enues. But today let’s look at the Aus­tri­ans. Well, not the Aus­tri­ans, per se, but rather a nation that has opted to hew pretty closely to the Aus­trian School of eco­nom­ics.

Yes, we don’t have to merely the­o­rize about what the results would be in fol­low­ing the Aus­trian model of reduced gov­ern­ment spend­ing dur­ing a reces­sion. We can make a pretty direct comparison.

Prime Min­is­ter David Cameron is shrink­ing gov­er­ment spending

You see, the United Kingdom’s Prime Min­is­ter David Cameron has been mov­ing steadily toward the Aus­trian aus­ter­ity model since he took the job in 2010. Much of the UK’s cit­i­zenry were enthu­si­as­tic in sup­port of spend­ing cuts. Cameron’s Finance Min­is­ter, George Osbourne, quickly cut gov­ern­ment spend­ing by 19 per­cent. He also cut the top income tax rate from 50 per­cent to 45 per­cent. Within a few months, the nation’s econ­omy slowed notice­ably. What was the administration’s response? More spend­ing cuts, nat­u­rally.

And here we are, a few months after the sec­ond round of cuts. Would you be sur­prised to learn that the UK has gone back into a reces­sion? In fact, it has now eclipsed the Depres­sion era as the worst recov­ery period in the nation’s his­tory. If you believe the Key­ne­sian coun­ter­cycli­cal eco­nomic the­ory, then you were expect­ing it. If you’re an Aus­trian adher­ent, you’re prob­a­bly try­ing to come up with evi­dence that they sim­ply hadn’t fol­lowed it closely enough…sort of how many Repub­li­cans believe that every GOP loss means that their can­di­date was so lib­eral as to be indis­tin­guish­able from a Democrat.

The UK now finds itself in a down­ward spi­ral. As Osbourne cuts spend­ing, tax rev­enues are drop­ping even faster. Even in the rosiest pro­jec­tions, and despite his cuts, the national debt is expected to rise from its cur­rent 63.1 per­cent of GDP to 76.3 per­cent over the next two years.

The United States econ­omy has more in com­mon with the United King­dom econ­omy than it has with any other in Europe. Com­par­ing the two, then, where the one major dif­fer­ence in 2010 and 2011 is the Key­ne­sian ver­sus Aus­trian model, is quite reasonable.

That’s not to say that the sin­gle data point is con­clu­sive evi­dence. There are always local effects that can have addi­tional impact, and intro­duce noise into the com­par­a­tive model. That cer­tainly could be the case here. Nonethe­less, it’s yet another nail in the Aus­trian coffin.

It’s worth exam­in­ing the United States econ­omy dur­ing the Franklin Roo­sevelt years for an addi­tional com­par­i­son. The econ­omy showed a few signs of recov­ery after sev­eral Key­ne­sian pro­grams were imple­mented. Under pres­sure from Con­gress, stem­ming from con­cern regard­ing mount­ing debt, Roo­sevelt agreed to sub­stan­tial cuts in these pro­grams. Just as in the UK in 2011, the US recov­ery stalled. Unlike the UK, how­ever, Roo­sevelt used that result as evi­dence in favor of addi­tional Key­ne­sian pro­grams, which he was able to get enacted.

Here’s some food for thought: Repub­li­can Pres­i­den­tial can­di­date Mitt Rom­ney pro­poses exactly the same sort of eco­nomic med­i­cine as that imple­mented by Cameron & Co.: tax cuts on the wealthy, cou­pled with cuts in gov­ern­ment spending.

Do we really want to fol­low in the foot­steps of David Cameron?

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