A 1996 column from the Australian’s Alan Wood, not available online:
A draft letter is circulating around Australian economics faculties seeking signatures for an attack on the Howard Government’s fiscal policy.
Its originators are four academic economists: John Nevile of the University of NSW, John Quiggin of James Cook University, Frank Stilwell of Sydney University and Phil O’Hara of Curtin University ...
The letter consists of three paragraphs, which are worth considering in turn. The first paragraph reads:
“The Federal Government’s commitment to reduce expenditure by $8 billion is economically irresponsible. Expenditure cuts of that magnitude will inevitably cause job losses - directly in the public sector and indirectly in the private sector as a result of the downward multiplier effects. There is a strong possibility of precipitating a substantial economic recession.”
Ten years on, we have massive economic growth, no recession, and record lows in unemployment.
The second paragraph of the letter reads:
“The goal of a balanced budget indicates pre-Keynesian economic thinking. It ignores the creative role which fiscal policy can play in economic management, especially in tackling unemployment. Moreover, the expenditure cuts would likely fail to produce a balanced budget anyway because the consequent reduction in jobs and incomes would result in lower tax revenues being generated in the next fiscal year.”
This is just plain wrong.
Wood was right. Regrettably, tax revenues have increased since 1996.
Paragraph three of the letter reads:
“More attention needs to be given to the role of government expenditure on repairing the nation’s rundown infrastructure, creating jobs and fostering industry and regional development. If necessary, increased taxation and other revenue options should be under consideration. Savage expenditure cuts are economically irresponsible and socially damaging.”
As part of Howard’s “savage expenditure cuts”, Quiggin received a one million dollar grant in 2003.
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