Understanding Fiscal Policy and the New Fiscalism

Mario Seccareccia ()

International Journal of Political Economy, 2012, vol. 41, issue 2, 61-81

Abstract: Canada's record both before and during the financial crisis has been recognized by many in the media as one of great achievement that other countries should seek to learn from and emulate: a dozen years of public-sector budgetary surpluses followed by fiscal stimulus packages that spanned two years after the financial crisis, and the lowest budget deficits and debt-to-gross domestic product ratios of the G-7 countries. This paper looks carefully at that record and asks the question of whether the policy of austerity pursued before the financial crisis and after 2010 is one that should seriously be emulated. After analyzing the destabilizing consequences of this policy for sustaining future growth, the article concludes that the restrictive fiscal actions taken before the financial crisis did little to protect the Canadian economy from the crisis and recession that followed, and was essentially a Pyrrhic victory.

Date: 2012
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DOI: 10.2753/IJP0891-1916410204

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