In Case You Needed More Proof That It's Stupid To Cut Government Spending In A Weak Economy...

There are two basic approaches to fixing our crappy economy.

The first approach is called "austerity."

This logic for this approach rests on the theory that our economy is crappy because our government is spending more than it takes in and that the resulting deficit is creating "uncertainty." Once this deficit spending is reduced, this theory goes, uncertainty will ease, and confidence will return. And then our economy can recover in earnest.

The second approach is called "stimulus."

The logic for this approach rests on the theory that our economy is crappy because consumers are unemployed and broke and have little money to spend. Because consumers have little money to spend, this theory continues, the government should take up the slack and deficit-spend until unemployment drops and consumers have more money to spend. This government spending, in other words, will keep the blood flowing until the patient is healthy again.

Five years ago, economists were locked in a fierce debate about which approach was better--"stimulus" or "austerity."

Thankfully, that question has now been answered.

The "stimulus" approach is better.

Importantly, this question has not just been answered theoretically.

It has been answered empirically.

In 2008-2009, you will recall, the U.S. and Europe both went into a deep recession.

In response, the U.S. tried "stimulus."

Europe, meanwhile--and most notably the United Kingdom--tried "austerity."

You know how well "austerity" has worked in southern Europe. The collapse of the Greek economy, and the ongoing weakness in Italy and Spain and much of the rest of the Eurozone, illustrates clearly that you can't cut your way to prosperity.

What you might not know is how poorly "austerity" has worked in the European economy that is perhaps most like our own: The UK.

Economist Paul Krugman put up a chart this morning that reminds us how well it has worked.

The red line in the chart below shows the progress of the United States economy over the past five years. The United States, you will recall, enacted stimulus in response to the crisis. And, today, the U.S. economy is significantly larger than it was before the recession.

The blue line in the chart, meanwhile, is the UK economy. The UK, you will recall, tried "austerity" as a way of fixing its economy. The UK economy has performed very poorly for the last several years, and is still smaller than it was before the crisis.

This chart should make everyone who still believes that the way to fix our economy today is to cut government spending question their thinking.

Unfortunately, in the past five years, these two approaches have been "politicized," which means that the people who advocate them never question their thinking.

They just look at their party "talking points" and start talking.

That's too bad.

Because what it means is that, while each political team tries to score political points by reading from their party teleprompters, the rest of us have to suffer through a crappy economy.