The Macroeconomics of Recession, Deficits, and Austerity
The Macroeconomics of Recession, Deficits, and Austerity Presentation by Jim Stanford to the Elementary Teachers Federation of Ontario Economist, Canadian Auto Workers May 2012
How Ordinary People Can Reclaim Economics… …and Make it Work FOR Us Instead of AGAINST Us! www.economicsforeveryone.ca
Fiscal Math 101
+ =
Bad recession Lousy Recovery Deficit
Macroeconomics of Deficits • Ontario’s deficit was created by the financial crisis & recession (not overspending). • The recovery has been historically weak – that’s why the budget has been slow to recover. • Austerity perversely prolongs recessionary conditions. • Stimulating growth & employment is an essential pre-condition for improving fiscal health.
Ontario Provincial Deficit 5
$ Billion
0 -5 -10 -15 -20 -25 2003-4
2004-5
2005-6
2006-7
2007-8
2008-9
2009-10
2010-11
Impact of Recession • Double-barreled impact on revenues: – Decline in GDP (8-10% below previous trend) = $10 billion lost revenue. – Decline in revenue as share of GDP (
How Ordinary People Can Reclaim Economics… …and Make it Work FOR Us Instead of AGAINST Us! www.economicsforeveryone.ca
Fiscal Math 101
+ =
Bad recession Lousy Recovery Deficit
Macroeconomics of Deficits • Ontario’s deficit was created by the financial crisis & recession (not overspending). • The recovery has been historically weak – that’s why the budget has been slow to recover. • Austerity perversely prolongs recessionary conditions. • Stimulating growth & employment is an essential pre-condition for improving fiscal health.
Ontario Provincial Deficit 5
$ Billion
0 -5 -10 -15 -20 -25 2003-4
2004-5
2005-6
2006-7
2007-8
2008-9
2009-10
2010-11
Impact of Recession • Double-barreled impact on revenues: – Decline in GDP (8-10% below previous trend) = $10 billion lost revenue. – Decline in revenue as share of GDP (
