All their economic roads lead to more spending

screen-shot-2017-01-06-at-2-34-12-pmIn commenting against our recent study exposing talk of “austerity” in Atlantic Canada as alarmist, Jordan Brennan’s prescriptions are misguided. Brennan himself recently published a paper with the Canadian Center for Policy Alternatives that depicts as austerity measures the modest attempts to keep government spending under control in Nova Scotia.

However, Brennan’s comment is useful in that it draws attention to an economic worldview that no one endorses, save those who profit from it. That view offers government growth and the hiring of more civil servants as the response to both a succeeding and a failing economy:

  1. If the economy is contracting, their standard recipe is that growing government and hiring more public sector workers serves as an economic stimulus and will prevent deeper recessionary troubles.  This suggests spending one’s way out of recessions, as British economist John Maynard Keynes proposed.
  2. If the economy is growing, Brennan thinks that governments ought to hire more public sector workers in order for government growth to keep up in proportion to overall economic growth. This suggests spending one’s way through economic booms (It means little that this is the opposite logic of point 1, and the contrary to what Keynes prescribed).

Brennan goes on to taunt the productive sectors of the economy in near-zero growth: “Nova Scotia’s public sector is giving a boost to overall employment growth when the private sector has not stepped up to do its part.”

Apart from the contradicting issues, the vicious circularity of the last point is lost on me.  Taxed more and more in order to pay for the bloated public sector in Nova Scotia, the productive sector is less able to hire additional workers.

It is not a shock to see that for those who over time profit most handsomely and most directly from greater and greater government spending, the only solution to every type of economic situation is more government spending.

 Editor’s Note: This blog entry is the final part in a series of four blog posts related to our recent paper “Measuring Austerity in Atlantic Canada” by Patrick Webber. Following misdirected comments and criticism of the study, we compiled this series to clarify misconceptions and to underscore its findings. Read part one here. Read part two here. Read part three here.

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