In Canada, austerity is so 1990s

Like Brian Adams, austerity in Canada is a something of the 1990s. I am saying this because so many groups are now claiming, like the NDP is, that the conservative’s government commitment to a balanced budget is gonna hurt the economy and that this is “savage austerity”. The problem is that austerity was pretty much a 1990s thing…

Its pretty clear, the vast majority of the spending cuts realized in Canada were done in the years of liberal rule. What the conservatives did (and I am not a big supporter of the conservatives given many of their regulatory decisions and the census decision) is that they hiked spending during the recession. Some part of that hike was “automatic”, the majority was not. However, the conservatives continued with scheduled tax cuts in order to avoid any modifications in the expecations of markets which had been promised a series of tax cuts since the days of the liberal rule (the much debatted 2011 corporate tax cut was in fact a liberal decision). Hence, most of the effort now done to balance the budget is done at a much lower level than in the 1990s and is mostly based on the expenditures side.

Cleaning up spending racked up during the recession while keeping the tax burden stable or slightly declining is not what I would qualify as “hardcore austerity”. The claim of hardcore austerity today doesn’t hold up against austerity observed in the days of the “neoliberal and market-loving” Jean Chrétien (hear the irony of clichés)

And if it is “austerity”, its one of the good kind as underlined by Alberto Alesina since the “good ones” are generally based on expansionnary tax cuts and reductions in public spending.