[The rush to balance the budget is undermining a return to normal economic conditions. Austerity cuts have happened faster than expected, and will continue for another two years, even though the budget is balanced. That sort of decline in government spending won’t be offset by tax cuts (in fact these will arguably make things worse), which throttles back the economy. And, to see how Harper's pals in the Australian government are handling matters, read Austerity drive wipes out one in 11 federal government jobs in Canberra. *RON*]
As Finance Minister Joe Oliver this week touts Canada’s imminent return to balanced budgets, and sells the government’s pre-election tax cuts, some economists argue the Conservatives’ agenda of spending cuts and tax cuts are in part to blame for the country’s slow economic recovery.
The “rush to balance the budget” is “undermining” a return to normal economic conditions, the left-leaning Canadian Centre for Policy Alternatives (CCPA) said in a report released Wednesday.
The report said the federal government’s cuts have taken place faster than expected, and will continue for another two years past 2014, after the budget has been balanced. The CCPA estimated nearly 37,000 federal employees have already lost their jobs.
That sort of decline in government spending won’t be offset by tax cuts, argues economist Toby Sanger of the Canadian Union of Public Employees.
In a blog entry titled "Why the economy sucks," Sanger writes that today’s recovery is “a third slower than the recoveries of the 80s and 90s, while job and wage growth has also been dismal.”
He argues that’s at least in part because the economic impact of government cutbacks. Citing data from the Department of Finance and two private-sector economic analysis firms, Sanger says the negative economic impact of government cutbacks is greater than the positive impact of tax cuts.
“If the federal government cuts $1 billion from health care and social services, it will lead to a loss of an estimated 18,000 direct and indirect jobs and a decline in the economy of $2 billion,” Sanger writes.
“Meanwhile an income tax cut of $1 billion will only generate an estimated 6,000 jobs and boost the economy by $1.3 billion. So if the government cuts spending by $1 billion while also cutting income taxes by $1 billion, it will lead to a net loss of 12,000 jobs and a net decline in the economy of $0.7 billion.”
Sanger notes that government spending as a share of the economy is at a 70-year low, and under current government plans, is headed to an all-time low.
In its report, the CCPA says government cuts are having a direct impact on the quality of life of people who depend on various front-line government services. The report singles out Veterans Affairs, Employment Insurance and food inspection as three areas that have seen significant reductions in their ability to provide services.