It’s not the time for blind austerity

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As I’ve been watching the TV news the last couple of nights, troubling images of the rioting in Greece and Spain make it clear to me that “austerity” just isn’t working.

Evidence is piling up that austerity budgets and public spending cuts meant for reducing deficits are an experiment that’s gone terribly wrong at the expense of the citizens of Europe and around the globe.

Europe has been thrust back into a recession led by those countries where spending cuts have been most severe, including Ireland, Portugal, Spain, Italy and Greece, among others. Instead of rapidly reducing deficits, the spending cuts around the world have slowed the economy, increased unemployment, reduced revenues and even prolonged deficits.

The United Kingdom’s deficit, for example, is actually higher this year than last because their revenues have declined as a result of austerity measures.

In fact, the British Chamber of Commerce who publicly supported austerity measures are now calling for the government to stimulate the economy.

And I can’t help but notice that the people leading the charge for austerity and government belt-tightening (CBC TV's Kevin O’Leary comes immediately to mind) are themselves leading very affluent lives.

Back here in North America, the U.S. is facing its own austerity crisis with temporary stimulus measures set to expire soon and Republicans preaching — what else — deep spending cuts. This would plunge their country back into recession, taking Canada with them.

According to federal Finance Minister Jim Flaherty in this week’s Telegram, “Canada's bottom line is worse than many expected, with the deficit at $26 billion, up $5 billion from the March budget forecast.”  With these menacing clouds on the horizon and the undeniable evidence that austerity policies aren’t working, doesn’t it make more sense for governments to stimulate their economies, especially with today’s record low interest rates?

Even many fiscally conservative economists and bankers have urged this approach. Investing more in infrastructure, social programs and allowing wages to rise will lead to stronger economic growth and lower deficits in the future.

 

Wayne Lucas

president, CUPE NL

Organizations: British Chamber of Commerce, CBC

Geographic location: Greece, Spain, Europe Ireland Portugal Italy Canada United Kingdom North America U.S.

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  • Maggy Carter
    November 22, 2012 - 08:09

    We're not in an "austerity crisis" Mr. Lucas here, the U.S. or Europe. We are in a crisis brought on by unsustainable government spending - which is the the opposite of austerity. Government spending has not only outstripped the productive capacity of these nations to pay for it, but for decades and decades now they have been borrowing from their children and grandchildren. Much of that overspending has been on salaries and expenses for public sector employees - the people represented by your union. Health care alone will soon consume 50% of all provincial government revenues in this country. In this province in particular we have seen public sector bargaining produce settlements as high as 33% at a time when inflation is in the low single digits. Somebody eventually has to pay the piper. But Mr. Lucas you may want to hold onto your hat because government spending cuts in this province are about to take off. Dunderdale already knows this province has bitten off more than it can chew with this Muskrat boondoggle designed to accommodate its corporate friends. For a province this size, Muskrat Falls is a huge publicly funded project the raw economics of which are extraordinarily, mind-numbling bad. There is no proven need for this power, and no demand for it except among a handful of corporations who want it - but at prices well below the cost of production. The real economic value of most forms of production or manufacturing is measured in terms of its export potential. Muskrat Falls has no export potential - again other than at prices below the cost of production. The entirety of the Muskrat debt must therefore be amortized on the backs of ordinary Newfoundlanders - as ratepayers and as taxpayers. Get ready therefore for an enormous hit to the wallets of your members on both fronts. What amazes me is the conspicuous absence of any public expressions of concern by groups like CUPE as this monstrosity was being walked past regulatory and legislative review mechanisms that were first carefully blindsided by government. Despite the fact that unions are long regarded as cheerleaders for government spending, you would think that - in this case at least - they would see a looming threat to their own future. This taxpayer funded Muskrat thing will soak up so much of this province's fiscal capacity that spending in every other public sector will necessarily be cut to the bone. Don't expect much sympathy from non-public-sector workers when the you know what hits the fan. They will be too busy figuring out how to pay their heat and light bills to pay any notice.