For estimates of how fiscal consolidation through government spending cuts and tax increases have depressed economies in the past,see The Economist Economics focus: Cutting edge | The Economist
"...a fiscal consolidation equivalent to 1% of GDP leads on average to a 0.5% decline in GDP after two years,and to an increase of 0.3% in the unemployment rate. Spending cuts do less damage than tax increases.This is mainly because they seem to be associated with bigger declines in interest rates."
Presumably,many of these consolidations were done to rein in overheated economies,which is easier than applying austerity in an economic recession/depression as in Ireland's case.
The comment above about declines in interest rates has particular relevance for Ireland:should the huge premium on Irish government bond interest rate be restored to near the former small premium over Germany's,that would undoubtedly assure a strong recovery,if not a revived Celtic Tiger.
How much of a negative impact will the government's austerity programme have? With the structural deficit in the range of 8 to 10% of GDP (ie.the deficit that would remain even if the economy recovered fully),elimination of this deficit over four years would reduce the economy by 4 to 5 percentage points if the 1%/0.5% ratio in the above quote applied,but this drop of 4 to 5% is in isolation from the remaining economic trends. For example,if a drop in interest rates and increases in exports and consumer spending boosted economic growth by 2.5% a year,that would allow for economic growth of about 10% over four years less the austerity impact of 4 to 5%,for a net growth of 5 to 6% or about 1 to 1.5% a year.
This slow growth would make it difficult to eliminate the non-structural part of the government deficit associated with a weak economy. Another negative is that the weak economy could easily be tipped into a double dip depression if the December budget relies heavily on taxes to cut the deficit,especially taxes on low income groups whose tendency to spend most or all of their incomes supports aggregate demand in the economy in the Keynesian economic model.