The Parliamentary Budget Office has released its report on last month's Federal Budget. Kevin Page should be proud of the work his office has done. As was the case with its reports on the War in Afghanistan and the the purchase of the F35 fighter jets, the report excoriates the government's numbers:
The federal government's most recent "jobs and growth" budget will wind up costing Canada both jobs and economic growth over the next few years, the Parliamentary Budget Officer says in a new report.
The PBO's latest estimates on the impact of the 2013 budget handed down in March show the cumulative impact will be to reduce economic growth by 0.12 per cent and job creation by 14,000 by 2016.
It's all part of what New York Times columnist Paul Krugman calls The Story of Our Time:"
Let’s start with what may be the most crucial thing to understand: the economy is not like an individual family.Families earn what they can, and spend as much as they think prudent; spending and earning opportunities are two different things. In the economy as a whole, however, income and spending are interdependent: my spending is your income, and your spending is my income. If both of us slash spending at the same time, both of our incomes will fall too.And that’s what happened after the financial crisis of 2008. Many people suddenly cut spending, either because they chose to or because their creditors forced them to; meanwhile, not many people were able or willing to spend more. The result was a plunge in incomes that also caused a plunge in employment, creating the depression that persists to this day.
Yet the Harper government bought the analogy that government budgets are like family budgets. Its response to the financial crisis has been to cut spending. True, it didn't take that path in 2008. But that was because its survival was at stake. Now, with a majority, Harper and Co. insist that they can cut their way to prosperity. They keep on insisting that:
the real problem is on the economy’s supply side: that workers lack the skills they need, or that unemployment insurance has destroyed the incentive to work, or that the looming menace of universal health care is preventing hiring, or whatever. How do we know that they’re wrong?Well, I could go on at length on this topic, but just look at the predictions the two sides in this debate have made. People like me predicted right from the start that large budget deficits would have little effect on interest rates, that large-scale “money printing” by the Fed (not a good description of actual Fed policy, but never mind) wouldn’t be inflationary, that austerity policies would lead to terrible economic downturns. The other side jeered, insisting that interest rates would skyrocket and that austerity would actually lead to economic expansion. Ask bond traders, or the suffering populations of Spain, Portugal and so on, how it actually turned out.
In the face of all the evidence, they keep insisting that austerity works. Perhaps on another planet -- but not on this one. Not here. Not now.