Commentary,  Fiscal Policy,  Macroeconomics

Austerity Can Make Debt Problems Worse

The health and economic side-effects of the COVID-19 pandemic have caused major deficits, at both the federal and provincial levels of government. With vaccinations continuing and the economy rebounding, many commentators now argue for a quick retrenchment in government spending to reduce deficits and debt. Centre for Future Work Director Jim Stanford recently presented to the CARE Conference at Memorial University in St. John’s, Nfld., on the outlook for public finances after the pandemic. A commentary based on his presentation is published here, part of the Fair Reset blog series hosted by the Newfoundland & Labrador Federation of Labour. And a video recording of his presentation has also been posted by the conference organizers, embedded here:

Play Video about Debt, Interest, and Growth

Finally, Jim’s presentation slides – which show the hard math of why public debt charges as a share of GDP have declined dramatically, and are likely to continue falling – can be downloaded here. Arguments that public services must be downsized quickly and painfully, on pain of hitting an imaginary ‘debt wall’, are cover for the long-standing preference of some powerful interest groups for permanent reductions in services and income supports… whether the deficit is big or small.

Jim Stanford is Economist and Director of the Centre for Future Work. He divides his time between Sydney, Australia and Vancouver, Canada. Jim is one of Canada’s best-known economic commentators. He served for over 20 years as Economist and Director of Policy with Unifor, Canada’s largest private-sector trade union.