A personal position: Let’s stop venerating public deficit reduction

I stand in utter disbelief as I hear call after call for the need to contain public deficit, as though it were a panacea to all our economic ailments. A number of political, economic and financial players are stigmatising anyone who doesn’t toe the line of the widely accepted dogma; namely, the need to balance the books.

It is not a lack of knowledge about economic policymaking that moves me to oppose this policy, but rather, it is as an ordinary citizen that I take a stand against policies that offer no understandable, concrete solutions or mechanisms for actually resolving the crisis.

Let's take the example of the recent State of the Union Address by the President of the United States, Barack Obama, who called upon members of Congress not to implement new cutbacks being proposed by certain political and financial sectors. President Obama argued that "These budget cuts are a really bad idea. I'd even say they're unfair. Hundreds of thousands of Americans will be added to the unemployment rolls. This is not hypothetical: Americans will lose their jobs."

President Obama was defending his goal of passing new measures geared towards investment in new and smarter physical infrastructure. Not only would fresh investment help improve the education system and the 'Made in America' brand by boosting manufacturing (thus creating jobs and ultimately well-being), but it would also go a long way to increasing consumer spending and halting the erosion of disposable income of Americans, amongst many other positives.

It's surprising that a country like the USA, with a deficit of 9.1% (second only to Greece and Egypt) should be the driving force behind the various international economic bodies (IMF, World Bank, G20, etc.) and their financial entities, whilst simultaneously promoting the application of deficit contention measures in other parts of the world, (Europe included), and, with the complicity of internationally respected public institutions.

Hopefully, I will be forgiven by more orthodox economists. While I admit we do need to limit costs and trim unnecessary waste left over from the recent economic boom, I disagree with unbridled austerity measures, with limiting investment in infrastructure, and with starving companies and families of credit. I sincerely find it hard to comprehend how we are to exit this crisis, with its inherent frustrations and social anxiety, and create jobs and social well-being if we continue to insist on implementing excessive cost-cutting policies. Simply put, this 'anorexic' subsistence is impairing society's ability to bounce back from this beating.

Current fiscal policies, and their consequent lack of resources, are leading to a deteriorated state of affairs in terms of living conditions for thousands of ordinary people. These measures have had a devastating effect on, and are at the root of, growing levels of social exclusion, debilitated mechanisms of wealth creation in companies and freezing public investment to close to zero. On top of this, young people are finding it impossible to land their first job here at home and are advised instead to emigrate in search of 'opportunities'.

We need to mobilise society with a message of hope to overcome our present situation. We also need to design proposals to promote economic growth and wealth creation, boost consumer spending and increase disposable income according to social needs. Finally, tax reform is needed for fair wealth redistribution and to encourage new models of social and economic behaviour.

As we move forward, may we recall the words of Groucho Marx: "Fight despair with happiness and courage."


* Published in El Economista, 04/03/2013 (Spanish)

Sabin Azua

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