Austerity, spending, and budgeting

How can a budget to include substantial deficit yet somehow be an Austerity Budget?

The short answer is that Liberals are mostly a bunch of corporate lawyers and brand managers who spend more time thinking up ways to sell the nonsense they think than anything else.

The longer answer involves these parts:

The ideology:

• Economic policy folks in government have a strong belief in neoclassical economic theory (even though everyone else in the world is starting to questing its validity).

The situation:

• Canada's economy is under attack and not doing well because the global economic order it was built for no longer exists.
• There are now too few jobs being created and too many jobs are being destroyed. (There is also lower real wage growth at the bottom of the wage grid).
• Canada's federal tax revenue is mostly based on wage taxes and consumption taxes.
• We do not tax wealthy folks, there is a rather low capital tax, and we do not tax financial transfers of "wealth" much.
• The government gives public money away to American finance capital through profit subsidies.
• American firms say thanks for all the money and then leave taking with them our (usually publicly paid for) IP.

Standard neoliberal policy:

• Government likes to pretend privatization adds to economic growth.

A sprinkle of War Keynesian spending:

• Government wants to up spending on non-productive things like defence thinking that it will prop-up the economy.

Hit a bump in the road involving our major trade partner (USA), and we get:

• Canadian workers' standard of living decline.
• A Canadian ecomomy circling the drain.

And, add it all together and we get budgets built on the idea of Austerity through general economic malaise and increased deficits through spending based on a failed ideology on things that do not grow the economy.

Or, said another way, deficits through stupid economic theory leading to government facilitating the export of the public's money to rich American investors.

Europe had lived through this kind of thinking following the 2008 financial crisis. Canada did not and so it seems did not learn any of those lessons.

Canada's austerity was (has always been) imposed by bankers. It has not completely tanked the economy because of oil exports to the USA were increasing during the latest previous crises.

Austerity today is similar, but there is nothing holding us up.

It is important to note that Austerity in the budget here only apply to part of the budget that is ongoing spending (on people and services). The austerity does not apply to borrowing and giving that money to capital.

Austerity budgets that expand the deficit.

• Spend less, invest more.
• Cut money to people, invest in capital profits.
• Tighten our belts to throw our money away.

Implicit in the program is the neoliberal trickle-down theory of jobs being created through tax cuts and profit subsidies. This is not new and we know it doesn't work.

This is not to say that borrowing money to build productive assets could be good economic policy. Indeed, you cannot easily provide fuel to productive investment and jobs without doing that.

The difference between the Left's program and what is being done right now is that our program directly uses government funds to build things that produce and generate revenue. The Liberals throw money around and hope someone does something useful with it, which requires some very specific circumstances to exist that do not currently exist.

The liberal program is bad policy. Especially when revenue is through the floor.

It is like buying a house through a mortgage and then losing your job. You become house rich and cash poor. But, what we are doing now is like borrowing against the house for more than it is worth to install a hot tub (that doesn't increase the value of the home) and still not have a (good) job.

They are like an investor thinking it would be a good idea to take out a loan to lease some space and start a cafe to make money.

To properly critique what is going on, the broad left in Canada has to break out of its shallow analysis of government spending. Many are still confused about the nature of the "increased deficit" because that generally means spending, but we are long past the days when the Left should be supporting economic policy of: Dig a hole, fill it, get magic economic growth.

The rule should be to always be critical of stupid spending, not just demand more spending. And, much of what is being announced is stupid spending.

As a country, we should also be long past the days believing you can cut spending to social programs and federal regulation and not create negative consequences that cost more than you are saving.

An alternative is available.