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Challenging the mantra of No Deficits

Re Liberals charge Harper running another
billion-dollar deficit*

Larry Kazdan, Vancouver BC

Regardless of whether one is pro or anti-Harper, the appropriateness of government deficits or surplus depends on what is happening in the real economy. Currently Canada has a large trade deficit which means more money leaves the economy than comes in, and our private corporations are hoarding money rather than investing into a stagnant economy. So right now deficit spending is required to increase domestic demand that will support business activity and put more people back to work.

Harper should be criticized not because he has run deficits in the past, but because cutting government expenditures at the wrong time depresses the economy. Criticism can also be extended to other party leaders who think fiscal responsibility means balancing the budget rather than creating a fully-productive economy that does not waste the talents of 1.3 million Canadians currently seeking jobs.

* [Ref, Article, Aug. 22, 2015: http://thelinkpaper.ca/?p=48683] 

Larry Kazdan,
620 E. 23 Ave.,
Vancouver, B.C.
(604) 874-9982

Footnotes

1. Keynes quote
http://rortybomb.wordpress.com/2012/03/06/vsp-historical-trip-also-keynes-look-after-unemployment-and-the-budget-will-look-after-itself/
From a 1933 radio debate Keynes (bolding added):

"You will never balance the Budget through measures which reduce the national income.  The Chancellor would simply be chasing his own tail – or cloven hoof!  The only chance of balancing the Budget in the long run is to bring things back to normal, and so avoid the enormous Budget charges arising out of unemployment…Even if you take the Budget as your test, the criterion of whether the economy would be useful or not is the state of employment…I do not believe that measures which truly enrich the country will injure the public credit…It is the burden of unemployment and the decline in the national income which are upsetting the Budget. Look after the unemployment, and the Budget will look after itself."

2.  Keynes would not support fiscal austerity
http://bilbo.economicoutlook.net/blog/?p=18523

Australian Economist Bill Mitchell:
"The fact is that the budget outcome should never be the goal of policy. The goal should be to maximise real outcomes and maintain price stability. The problem is that in elevating the budget outcome to the centre stage and setting artificial rules, governments are very likely to damage prosperity.

"They will typically also undermine the achievement of their own targets into the bargain because the fiscal austerity will reduce growth and the automatic stabilisers will take care of the rest!

"It is a far better strategy to forget about the budget balance and concentrate on environmentally-sustainable growth and prosperity via well-paid employment."

* * *

This article appears in the Autumn 2015 Edition of Dialogue magazine (without the footnotes)

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