Paul Krugman, Nobel laureate for economics, has been trying to convince policy makers everywhere that austerity is bad for economies. In his column in The New York Times today he points out that "All around Europe’s periphery, from Spain to Latvia, austerity policies have produced Depression-level slumps and Depression-level unemployment; the confidence fairy is nowhere to be seen, not even in Britain, whose turn to austerity two years ago was greeted with loud hosannas by policy elites on both sides of the Atlantic."
But today he's cautiously optimistic because "the confidence fairy" that was supposed to magically restore confidence and stimulate private investment seems to be finally seen for the naked empress it always was: "Suddenly, everyone is admitting that austerity isn’t working."
One of the those people is Canadian Parliamentary Budget Officer Kevin Page. His latest report says that while Conservative fiscal cuts will bring down the deficit, they also will mean enormous job losses, with more economic problems down the line. ""The PBO expects that restraint and reductions in government spending on
programs in Canada will act as a drag on economic growth and job
creation, pushing the economy further away from its potential (gross
domestic product) and delaying the economic recovery," the report says according to the CBC.
Interestingly, The Globe and Mail story on Page's findings made no mention of the damage caused by austerity, but concentrates solely on the deficit drop. It would seem that even when the evidenc is right in front of them, some members of Canada's chattering class haven't got the message about the confidence fairy's demise.