The Harper government should avoid fiscal austerity while the Bank of Canada keeps monetary policy loose, a group of economists warned on Thursday.
“If you follow austerity measures — yes, your fiscal deficit will go down, but so will growth,” Stephany Griffith-Jones, program director at Columbia University’s Institute for Policy Dialogue, told a group that included many NDP MPs on Parliament Hill Thursday.
“Because the debt-to-GDP indicator is accounted not just by the amount of debt, but also by the level of GDP, you can have debt to GDP actually increase,” Griffith-Jones said.
Griffith-Jones was one of many economists invited to weigh in at the Canadian Centre for Policy Alternatives’ Alternative Federal Budget Roundtable 2012.
The full-day event, which was sponsored by NDP finance critic Peter Julian, also attracted other NDP MPs including Guy Caron, Raymond Côté and Wayne Marston, all of whom were repeatedly told the government should never have stopped its fiscal stimulus.
“We have to question some of the conventional wisdom on fiscal affairs, even though everyone is concerned about budgets, deficits and debt,” Canadian Auto Workers economist Jim Stanford argued.
“The reality is the federal government can borrow money for 10 years at two per cent,” Stanford said. “That’s free in real terms.”
Yanis Varoufakis, author of The Global Minotaur: America, the True Origins of the Financial Crisis, and the Future of the World Economy, said the Canadian government mistakenly embraced the concept of expansionary austerity, something that is an oxymoron if examined.
Varoufakis said politicians should learn from history and not repeat the Great Crash of 1937-1938.
By cutting off New Deal stimulus and bowing to the pressure of debt hawks, he said, President Roosevelt’s change of course created a severe recession that was only ended by World War II.
Patti Croft, the recently retired chief economist for RBC Global Asset Management, offered the dissenting opinion.
“I think this question of fiscal austerity is not an issue for Canada,” Croft countered.
While agreeing that an austerity budget would be the wrong policy prescription right now for many European countries, Croft didn’t think that applied to Canada.
“I think the time is right to focus on reducing the deficit and getting back into a balanced position, but doing so in kind of a gentle, friendly, Canadian way,” she said.
“By that, I mean that we’re not promising to balance the budget by next year. We’re talking about four, five years down the road, but having a plan that ultimately takes us down that road.”
Original Article
Source: iPolitics
Author: BJ Siekierski
“If you follow austerity measures — yes, your fiscal deficit will go down, but so will growth,” Stephany Griffith-Jones, program director at Columbia University’s Institute for Policy Dialogue, told a group that included many NDP MPs on Parliament Hill Thursday.
“Because the debt-to-GDP indicator is accounted not just by the amount of debt, but also by the level of GDP, you can have debt to GDP actually increase,” Griffith-Jones said.
Griffith-Jones was one of many economists invited to weigh in at the Canadian Centre for Policy Alternatives’ Alternative Federal Budget Roundtable 2012.
The full-day event, which was sponsored by NDP finance critic Peter Julian, also attracted other NDP MPs including Guy Caron, Raymond Côté and Wayne Marston, all of whom were repeatedly told the government should never have stopped its fiscal stimulus.
“We have to question some of the conventional wisdom on fiscal affairs, even though everyone is concerned about budgets, deficits and debt,” Canadian Auto Workers economist Jim Stanford argued.
“The reality is the federal government can borrow money for 10 years at two per cent,” Stanford said. “That’s free in real terms.”
Yanis Varoufakis, author of The Global Minotaur: America, the True Origins of the Financial Crisis, and the Future of the World Economy, said the Canadian government mistakenly embraced the concept of expansionary austerity, something that is an oxymoron if examined.
Varoufakis said politicians should learn from history and not repeat the Great Crash of 1937-1938.
By cutting off New Deal stimulus and bowing to the pressure of debt hawks, he said, President Roosevelt’s change of course created a severe recession that was only ended by World War II.
Patti Croft, the recently retired chief economist for RBC Global Asset Management, offered the dissenting opinion.
“I think this question of fiscal austerity is not an issue for Canada,” Croft countered.
While agreeing that an austerity budget would be the wrong policy prescription right now for many European countries, Croft didn’t think that applied to Canada.
“I think the time is right to focus on reducing the deficit and getting back into a balanced position, but doing so in kind of a gentle, friendly, Canadian way,” she said.
“By that, I mean that we’re not promising to balance the budget by next year. We’re talking about four, five years down the road, but having a plan that ultimately takes us down that road.”
Original Article
Source: iPolitics
Author: BJ Siekierski
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