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William Watson: 'Austerity'? You must be joking

If we did have a mind to tighten our collective belt, first we’d have to figure out where we left it, for we’re long past belt-loosening and well into buttons popping

William Watson
Sep 08, 2020 ??? ??? 4 minute read
Reports suggest the PM and the minister of finance are all-in on further aggressive debt expansion in order to “build back better."
Reports suggest the PM and the minister of finance are all-in on further aggressive debt expansion in order to “build back better." Photo by James Park/Bloomberg

I’m afraid I don’t do Twitter. Life is too short for hourly spats or the latest Trump eruption. So I learn via John Ivison that a senior advisor to the prime minister last week tweeted in response to concerns about the current fiscal situation that: “Austerity shrinks the economy further, costs jobs and is out of step with global reality.”?

Yes, he did actually use the word “austerity,” as in “austere,” synonyms for which (I do use the web) include: severe, stern, strict, harsh, unfeeling, stony, flinty, dour, grim, cold, frosty, frigid, icy, chilly, unemotional — all of which, as it happens, are also Liberal synonyms for “Tory.”?

There are times when the word “austerity” would be appropriate, when belts really do have to be tightened, though at such timesunemotionalism usually has little to do with it. Quite the contrary: in 1939-45 a strong motivator was patriotism, the very emotional love of one’s country.?

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But use of “austerity” in our current circumstances is — I won’t use the over-used “obscene” — but certainly wildly inappropriate. If we did have a mind to tighten our collective belt, first we’d have to figure out where we left it, for we’re long past belt-loosening and well into buttons popping, zippers coming apart and trousers splitting. Talking about “austerity” now is as if a group of gourmands, having just eaten 13 courses, were debating whether to move on to number 14 and a supporter of continuing the bacchanal started pointing out the terrible damage malnutrition can do to people. Well, yes, it can. But that’s not exactly relevant. Or in good taste.?

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Austerity? We are working on a budget deficit of $380 billion for this year, which is more than last year’s total budget spending of $375 billion. The current plan is to double spending from last year. Given Ottawa’s struggles managing its internal payments system and spending infrastructure money on time, there’s a real question whether it can actually get that much money out the door inside 12 months — without physical cash drops by Chinook helicopters, that is.

For most people, even fiscal conservatives, this year’s budget deficit is a sunk cost, whether they themselves would have gone as high as $380 billion or not. The discussion now is whether to keep on borrowing and spending, to the tune of maybe another $100 billion, as suggested by the trial balloons from the PM’s office and the alarmed leaks from the Department of Finance, or whether at some point reasonably soon to start reining it all in and moving back to something a little closer to normal — say a federal deficit only $20 billion or $30 billion higher than it has ever been.?

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Reports suggest the PM and the minister of finance are all-in on further aggressive debt expansion in order to “build back better,” a policy that even borrows its slogan (from the American left). But what is it exactly that has to be built back? We’ve suffered a pandemic, not a hurricane or earthquake. We’ve got more than enough planes, airports, restaurants and retail stores — way more than enough. That’s the problem: extreme excess capacity in these areas, and tens, probably hundreds of thousands of people aching to get back to work with infrastructure we already have. But patrons and travellers are leery and governments risk-averse. The challenge is not “build back better,” it’s “go back safely.”?

Building new transit lines or green-fitting the housing stock will be great for construction workers and green technicians, who haven’t actually been hard hit by the lockdown, but it will do nothing for unemployed pilots, flight attendants, chefs, waiters, retail clerks and so on. What would help are conspicuous anti-virus safety measures and a gradual return of confidence as more people get back to normal. That will take money. But not $100 billion more.?

Strangely, I have a very clear memory of when I first heard the word “austerity.” It was in late June 1962. I was in about Grade 4. And Prime Minister Diefenbaker, whose Progressive Conservatives had been re-elected the previous week with a substantially reduced caucus, had come on TV — no doubt pre-empting one of my favourite cartoons or westerns — to talk about the need for “austerity” as the government took emergency measures to stop a run on the Canadian dollar. I had no idea what a run on the dollar was but the adult in the room, either my father or grandfather, did explain that austerity meant tightening your belt. (Yes, such are the deeply nerdy origins of many newspaper columnists.)?

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The next day’s New York Times ran the story on its front page, above the fold: “Canada borrows billion to halt economic decline.” That is not a typo. “Billion,” singular, is correct. The government had arranged loans and credits of just over $1 billion “to bolster Canada’s sagging dollar.” In those days you could bolster a currency with just $1 billion. You can read accounts of Ottawa’s “week of crisis” by Canadian journalism legends Peter C. Newman and Blair Fraser, who called it “the gravest peacetime crisis since the Great Depression,” with Cabinet meeting “in almost continuous session.” In those days, Cabinet helped build decisions from the ground up. Contemporary reporting is seriously impressed with the austerity measures Ottawa was being forced to take: spending cuts of — imagine! — $250,000,000. A $250-million “slash,” Newman called it.?

And now anyone who worries that a $380-billiondeficit — 1,500 times that — may be just a little too much for the long-run sustainability of the public finances is a fan of “austerity.”?

Financial Post

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