Macroeconomic Austerity Works

It's always surprising to hear an economist argue that macroeconomic austerity doesn't work, particularly when the economist is Canadian and was a recent advisor to the minister and deputy minister of finance of a purportedly conservative government (of course, in Canada, even a so-called federal conservative party is actually quite liberal).  The shock comes because Canada actually ran the macroeconomic austerity experiment between 1993 and 2006, and it worked.  Even more amazing is that the experiment was successfully run under a liberal government.  Perhaps some economists should be more aware of their nation's own economic history. The following plot shows general government total expenditures as a percentage of GDP for Canada and the USA between 1980 and 2012. Between 1980 and 1992, under the governments of Pierre Trudeau (1980-1984, Liberal Party) and Brian Mulroney (1984-1993, Progressive Conservative Party), Canada's general government total...(Read Full Post)