Monday, December 19, 2011

Unemployed people can't pay taxes, and they certainly curtail their spending

Like the good neoclassical economist he is, President Harper said on Friday that he and his bulldog want to indulge their pathological addiction to austerity and tackle that mean old junk yard federal budget when, in fact, we know that they should really be focusing on the job creation strategies we so desperately need. My last  few posts have painted a very bleak picture of the Canadian economy, and further austerity measures or implementing the ones in the works are only going to make things worse, draging out the recession/depression even longer.

There is only one reason to concentrate on reducing government debt at the expense of other economic inititatives, and that is to satisfy "markets" - that is,  to create investor confidence.  But we should always remember that the financial sector contributes next to nothing directly to real GDP.  And austerity in the cause of debt reduction does nothing directly for the real, industrial economy. In fact, it creates only more hardship for real people and the economy by, among other effects, increasing the number of people unemployed and by reducing correlated spending and tax revenue. Unemployed people can't pay taxes, and they certainly curtail their spending.

We need reasonable economic growth through job creation, through some kind of economic stimulus, infrastructure projects or otherwise, for without reasonable growth government revenues suffer, and that gap, in turn, increases the pressure for more austerity measures because the money simply isn't there.  It's a an economic whirlpool difficult to escape. But jobs fuel the economy because employed people spend money, and both they and the business which are recipients of their spending, who also spend as businesses,  pay taxes and thus increase government revenues, part of which can be used for paying down debt at at reasonable pace while maintaining government programs that service Canadians in general.

Not much chance of this kind of thinking in Harperland  given what's emerged for many as a disturbing psychoanalytic reading of Harper the man, whose resentful - sometime vengeful - personality is fully reflected, as Dan Gardner suggests,  in the way both parliament and the government in general are run. This is a regime in which, as someone suggested the other day, lying is not a moral issue but a political tactic and empirical evidence ("stastistics") is irrelevant.  We cannot expect truth from such a regime let alone a wise economic policy, the irony being of course that the Harperites presumably won their beloved majority on the basis of promising sound economic management. Hello! Read my last three or four posts.

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