Is Portugal an anti-austerity story?

By Tyler Cowen.

"A recent NYT story by Liz Alderman says yes, but I find the argument hard to swallow.  Here’s from the OECD:

The cyclically adjusted deficit has decreased considerably, moving from 8.7% of potential GDP to 1.9% in 2013 and to 0.9% in 2014. This is better (lower) than the OECD average in 2014 (3.1%), reflecting some improvement in the underlying fiscal position of Portugal.

Or see p.20 here (pdf), which shows a rapidly diminishing Portuguese cyclically adjusted deficit since 2010.  Now I am myself skeptical of cyclically adjusted deficit measures, because they beg the question as to which changes are cyclical vs. structural.  You might instead try the EC:

…the lower-than-expected headline deficit in 2016 was mainly due to containment of current expenditure (0.8 % of GDP), particularly for intermediate consumption, and underexecution of capital expenditure (0.4% of GDP) which more than compensated a revenue shortfall of 1.0% of GDP (0.3% of GDP in tax revenue and 0.7% of GDP in non-tax revenue)

Does that sound like spending your way out of a recession?  Too right wing a source for you?  Catarina Principle in Jacobin wrote:

…while Portugal is known for having a left-wing government, it is not meaningfully an “anti-austerity” administration. A rhetoric of limiting poverty has come to replace any call to resist the austerity policies being imposed at the European level. Portugal is thus less a test case for a new left politics than a demonstration of the limits of government action in breaking through the austerity consensus.

Or consider the NYT article itself:

The government raised public sector salaries, the minimum wage and pensions and even restored the amount of vacation days to prebailout levels over objections from creditors like Germany and the International Monetary Fund. Incentives to stimulate business included development subsidies, tax credits and funding for small and midsize companies. Mr. Costa made up for the givebacks with cuts in infrastructure and other spending, whittling the annual budget deficit to less than 1 percent of its gross domestic product, compared with 4.4 percent when he took office. The government is on track to achieve a surplus by 2020, a year ahead of schedule, ending a quarter-century of deficits.

This passage also did not completely sway me:

“The actual stimulus spending was very small,” said João Borges de Assunção, a professor at the Católica Lisbon School of Business and Economics. “But the country’s mind-set became completely different, and from an economic perspective, that’s more impactful than the actual change in policy.”

Does that merit the headline “Portugal Dared to Cast Aside Austerity”?  Or the tweets I have been seeing in my feed, none of which by the way are calling for better numbers in this article?

I would say that further argumentation needs to be made.  Do note that much of the article is very good, claiming that positive real shocks help bring recessions to an end.  For instance, Portuguese exports and tourism have boomed, as noted, and they use drones to spray their crops, boosting yields.  That said, it is not just the headline that is at fault, as the article a few times picks up on the anti-austerity framing."