Bank bailouts and collapsing tax revenue, not stimulus spending, drove post-2008 debt growth

Evidence

In the United Kingdom, in particular, this collapse in tax receipts was especially alarming since nearly 25 percent of British taxes came out of the financial sector. Little surprise then that Britain’s debt ballooned. Of the rest of the increase in government debt, some 35 percent is the direct cost of bailing out the banks. Meanwhile, that antistate whipping boy for the growth in the debt, the fiscal stimulus, amounts to a mere 12 percent of the total. So if you want to blame the stimulus for the debt, you are going to try to account for the missing 87.5 percent of the effect. — Mark Blyth, Austerity, 140

Categorization

• XREF: Directly evidences the austerity-as-misdiagnosis thesis that Blyth develops throughout and that Mattei’s critique of austerity builds on; also connects to the larger econometric literature blaming bank rescues for sovereign debt. — connects to: Consolidations after 2008 crashed services while raising only regressive taxes — Mark Blyth, Austerity: The History of a Dangerous…, 602; The 2008 TARP bank bailout is a trigger of the austerity path that followed — Mark Blyth, Austerity: The History of a Dangerous…, 618; Bank debt transformed into state debt through lost revenue, not profligate spending — Mark Blyth, Austerity: The History of a Dangerous…, 139 (+2 more)

Broader Connections

• The European debt crisis resulted from banking losses, not sovereign overspending #corroborates (0.82) — Mark Blyth, Austerity, 40
• Fire-sale contagion, not state spending, drove the 2008 liquidity collapse. #corroborates (0.75) — Mark Blyth, Austerity, 85