Consolidations after 2008 crashed services while raising only regressive taxes

Evidence

Given this bust and deflationary bailout, the size of consolidation following the collapse was massive: 17 percent of GDP in Latvia, 13 percent in Lithuania, and 9 percent in Estonia, with half of it enforced in the first year, and most of it, per Alesina’s recommendations, on the expenditure side. Double-digit public-sector wage cuts became the norm across the REBLLs despite the IMF’s then managing director Dominique Strauss Kahn protesting that, at least in the case of Romania, the government should have taxed the wealthy instead. Expenditure cuts of such magnitude wreaked havoc in health, education, and social protection. Taxes were increased, but only on regressive value added taxes (VAT) and labor taxes. Massive tax evasion predictably followed, which simply worsened the overall fiscal situation. — Mark Blyth, Austerity, 602

Categorization

• XREF: Connects to Mattei’s critique of austerity’s distributive logic — regressive taxation plus expenditure cuts on welfare, which is the core claim of the broader austerity literature. — connects to: Bank bailouts and collapsing tax revenue, not stimulus spending, drove post-2008 debt growth — Mark Blyth, Austerity: The History of a Dangerous…, 140; Consolidation produces stagnation, fewer jobs, and homogeneous output; Regressive taxation and spending cuts serve the same class-confiscating function — Clara E. Mattei, Escape from Capitalism, 150

Broader Connections

• Bank bailouts and collapsing tax revenue, not stimulus spending, drove post-2008 debt growth #complicates (0.85) — Mark Blyth, Austerity, 140
• Consolidation produces stagnation, fewer jobs, and homogeneous output #expands (0.78)
• Regressive taxation and spending cuts serve the same class-confiscating function #corroborates (0.75) — Clara E. Mattei, Escape from Capitalism, 150