Europe shows stimulus needed
Re: “A budget by any other name … ” Terence Corcoran, March 15, 2013
Terence Corcoran is correct that taxation takes money out of the economy, but he ignores that government deficit spending puts additional monies in.
In order to keep the economy at full throttle, the federal government must offset what is happening in other sectors. If the private domestic sector decides to net save and spend less than its earnings, there will be a decrease in purchasing power. Also, if there is a trade deficit, there will be another demand drain because imports are costing us more than others are spending on our exports.
Government fiscal policy must be designed to fill these gaps if we do not want the economy to spiral downward. According to the Canadian-born economist John Kenneth Galbraith: “If there is idle capacity and unemployment, the government must spend more than it receives in taxes …. There is no merit at all in a policy that just balances income and outgo, none whatever.”
The experience of Europe, where unemployment rates are already double-digit, demonstrates convincingly that countercyclical fiscal policies are needed to inject money into a sputtering
Larry Kazdan, Vancouver