Now Is The Worst Time For Cuts: Why We Need Action, NOT Austerity


In 2008, there was a global financial crisis where banks failed, millions of people lost their homes, and tens of millions of people lost their jobs. 


Since then it has become clear, in country after country, that austerity does not work. 


If the private sector is melting down and people are being laid off in the millions, doing the same to the public sector doesn’t “share the pain.” It guarantees that the crisis will be deeper and longer. 


That’s not ideology. It’s evidence. 


In Europe, a single Euro in cuts could result in 1.70 in lost GDP. 


So we can borrow a dollar and keep people working at 2% interest. Or we can cut a dollar and lose a dollar and seventy cents. 


Additionally, the people who tend to be hardest hit by austerity are people who are marginalized and living in vulnerable situations. 


All spending is someone’s income, including government spending. All those people and contractors who work for government spend their incomes in the economy, which includes the private sector. Governments are not helping anyone with cuts. 


It’s also the worst possible time to be selling of public assets because we will get the worst price for them. Privatizing in bad times is like burning your furniture to stay warm, or eating your seed corn. 


Public services and good investments in public education, health care and infrastructure don’t cost, they pay. It makes everyone smarter and healthier. Good infrastructure can reduce environmental impacts while lowering the cost of living and doing business at the same time. 


How Would This Work?

Premiers and Mayors have been calling on the Federal Government for help with their finances. 


What’s been offered is not enough. Every single Premier has already written a letter asking if they can take advantage of the Government of Canada’s lower borrowing rate. 


Basically, they are asking the Federal Government to co-sign their debt. This would allow them to borrow at lower rates, saving billions in interest payments. 


We support this idea as a first step. However, if the Provinces want the Federal Government to help, the Federal Government should have a say.


So long as provinces are participating in the federal borrowing program, they would be prohibited from engaging in austerity, which will weaken cities’ and province’s economies, and their ability to pay back debt. 


In order to receive financial assistance, provinces would have to agree to:


  • Maintain current levels of employment, service in health care and all      levels of education

  • Make investments in infrastructure 

  • Place a moratorium on privatizations and the sales of public assets 

  • Minimize tax reductions 


In the last years, many provinces have been slow to “pass on” their infrastructure spending. The Federal Government should also consider direct transfers to municipalities for infrastructure projects. 


We also believe the Bank of Canada should consider direct lending to Provincial Governments in order to reduce risk, lower interest rates, and eliminate concerns around foreign currency fluctuations. 



Won’t This Cost More?


No. The historical and empirical evidence is that austerity never works in a downturn.


After the global financial crisis of 2008, the evidence is clear that every jurisdiction that cut ended up with worse GDP growth and higher debt. Every jurisdiction that rejected austerity and stimulated the economy ended up with a stronger economy and a better debt-to-GDP ratio. 


We already have debt. If we borrow to invest so we can grow, it will be easier to pay it off. If we don’t invest and grow, we will be laying people off and cutting their wages, even as the interest keeps adding up. 


Inclusive Recovery 


When governments cut, it’s the people who were already living on the edges who start to feel it the most.


About half of Canadians are living paycheque to paycheque. 


Strong Recovery is inclusive. We can start by making sure we’re not leaving people behind. Then, we can go further by giving people a chance to catch up. 


That means making sure when we’re investing in people, communities and businesses, that we’re inclusive about it. That means inclusive contracting and hiring. It means making sure we’re aware of past injustices and working to make amends.


Shovel Ready Projects + Green Recovery 


Canada has an “infrastructure deficit” in the hundreds of billions of dollars. There are many shovel ready projects across the country. 


  • Strategic infrastructure: ports, trade gateways

  • A wide range of “Green” initiatives providing incentives for shifting to green energy

  • Direct transfers to municipalities to accelerate water and sewer upgrades  

  • Affordable Housing projects, especially for First Nations 

  • “Rewilding” with wilderness restoration projects


These are all practical and positive ways to ensure a strong recovery.