A balance-sheet recession better explains flat consumption than expectations-based austerity theory.

Evidence

To explain this, there is no need to invoke the specter of Swedish consumers watching unlikely bond spreads while fretting about the national debt of one of the most solvent countries in the world. This is hyperbolic neoliberal fantasy looking for a set of supporting econometrics. Simply paying back debt when the economy is tanking, a classic “Balance Sheet Recession” a la Richard Koo, would suffice to explain what’s going on. That consumption didn’t rise is not a surprise unless you frame the problem in this absurdly counterintuitive way. That it stayed constant is the evidence for a common or garden stimulus effect—it didn’t fall despite the bust. It should have fallen further, but didn’t, because the tax cuts worked. — Mark Blyth, Austerity, 574

Categorization

• XREF: Connects to Richard Koo’s balance-sheet recession framework and to the broader austerity critique literature alongside Mattei. — connects to: Austerity theory only holds in a special case unlike actual economies — Mark Blyth, Austerity: The History of a Dangerous…, 480; Austerity deliberately targeted working-class consumption of even basic goods — Clara E. Mattei, The Capital Order: How Economists…, 716
• ADDENDUM: Supports the reader’s austerity/neoliberalism foundational reading as a direct counterpoint to expansionary-austerity claims being debunked.

Broader Connections

• Austerity theory only holds in a special case unlike actual economies #expands (0.72) — Mark Blyth, Austerity, 480