Now is Not the Time for Spending Cuts

The CCPA today released a paper I wrote (“Big Train Coming” )as a framing piece for the Alternative Federal Budget and the upcoming federal and provincial debate over the turn to austerity at a time of high unemployment.

Here is the media release:

“Given the fragile economic recovery and the weak job market, now is not the time for a sharp turn to spending cuts, says a study released today by the Canadian Centre for Policy Alternatives (CCPA).

“It would be a huge mistake to significantly tighten the fiscal screws,” says the study’s author, economist Andrew Jackson. “While debt has risen due to the Great Recession, there will be a major human and economic cost if deficits are eliminated before a real recovery has been achieved.”

The study points out that debt in Canada—even after two years of stimulus—is still at very low levels compared to other countries, and compared to the mid-1990s. It warns against repeating the major spending cuts of the 1990s, which shredded social programs and public services.

“Cuts will shrink rather than raise our economic potential. We need to maintain high rates of public and private investment to boost our future rate of growth,” Jackson says.

Balancing the books can be done without spending cuts or raising taxes: deficits and debt will shrink rapidly so long as interest rates are lower than the rate of economic growth and interest rates are at historically low levels today.

Once the economy has recovered, the report recommends changes in taxation in order to address the small structural deficit and to meet the costs of an ageing population.”

2 comments

  • Can you imagine, the UK announcing today they will lay off 450k public sector workers! wow, its pretty obvious that Keynes was actually a brit- or not!

    They stated they will do this without tipping the economy into a double dip- wow- talk about breaking your own back.

  • Given that much of the austerity is being supported by the same people who created the problem- financiers, has anybody read a good review of the re-regulation that Obama has imposed on the finance sector. (or other countries)

    Is this just me or are we witnessing not just 30 years of neo-liberalism, but also 10 years of having Wall Street rule the world and create for themselves themost expansive controlling and hugely profitable, non productive investment oriented financially fictitious (but creates real money) wealth creating systems.

    It was a long time making such political gains to allow such a gigantic castle to be built inside fortress American. One of teh issues I think we are getting caught up on is just because Humpety fell from the wall, we mistakenly believe those inside actually care. It is quite obvious with the current election campaign and the financing fiasco for the Reps, that it is win at all costs for those with the wealth.

    It sure is a sinking feeling when you get to this level, and see the view from the commanding heights. It sure is nasty and the outcome, unless somehow the castle of wealth can be regulated. But don;t count on it.

    Instead we are left to fight the foot soldiers of the Gordon variety and that army of zombies, misguiding the small skirmishes into pointless clown infested side shows. Rather than having debates with the tallest men in the world we are forever left outside the real show with the dog faced boys and girls.

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