Paul Krugman's Sunday column does a clear job of summarizing why the European mania for austerity has been a failure. This obviously doesn't mean that austerity -- cutting government deficits by cutting spending -- is always a bad idea. In good economic times it can sometimes make a great deal of sense. But when times are bad, cutting government spending tends to cut aggregate demand, which further depresses the economy, reducing tax receipts and in the end making it that much harder to balance the budget, so that it fails even at its main purpose.
This is all pretty obvious and has been borne out by plenty of examples, but austerity advocates have contended that austerity doesn't really harm the economy after all, or not lastingly anyway, based on some theoretical notions and some isolated instances when it has seemed to work. But recent experience in Europe seems to have convinced at least some of the austerity true believers of the error of their ways, at least if they pay attention to empirical evidence.