Austerity is anything but a progressive policy. The term austerity, which is used to describe what are often drastic cuts to state spending and sometimes increased taxes, is a deeply moral one. Governments claim that they make these cuts not because they are easy but because they are necessary. This term has seen a more widespread adoption in recent years because of the financial turmoil that has put major pressure on debt-addicted governments. Even socialist-led governments are adopting this vocabulary of restraint, much to the horror of their traditional constituencies — particularly public sector unions.
Despite the undeniably hurtful nature of these cuts and the poor choices about which programs to eliminate there is a progressive case to be made for austerity. This is true not only of traditional left-wing hobbyhorses like corporate subsidies and tax breaks (though some of these are too economically vital to be removed all at once), but also of core public services, such as education and health care. Avoiding the problem of rapidly rising spending in these sectors will only increase the pain of curbing them.
The progressive case for austerity is simple but admittedly counterintuitive: we all want public services. However, most of us want to pay less for them than we do now. Therefore, we must choose which are most important to us and optimize the delivery of these services so that we can continue to pay for them. If we want more services in health care, then we need to explain how to pay for them, whether that be by cutting services in another sector or increasing revenue to offset the new spending. New taxes are one way of doing this, as is ensuring economic growth to increase revenue from existing taxes.
Since most of us do not want to pay more taxes, then we either need other people to pay more taxes or we need taxes that we already have to raise more money. The others whom we want to pay more taxes are usually those wealthier than us, whether they be companies or individuals. This approach works to a point, but we need to be careful not to tax others so much that they want to move elsewhere to avoid the added tax burden. This would remove them from the economy, which is bad for growth and in turn reduces our revenue from other taxes. Therefore, increasing growth and taxes are only part of the solution. During good times they can more than cover our needs, but in hard times, they are simply not enough. This is especially true when our spending is growing faster than our economy, as is the case with health spending in Ontario. Some may argue that we should wait out the current crisis and rack up big deficits to keep up services. This makes some sense, but the more debt that piles up, the more likely it will be that we will eventually be forced to make deep cuts to make interest payments.
Rather than being forced to cut spending across the board, it is far better for governments to identify their priorities and reduce spending in lower priority areas. While cuts in these areas will certainly be controversial, they will be less painful than cuts that would go to the core of essential services, especially education and health. Spending must be controlled in those areas they do not come to swallow more than their fair share of the budget. This means capping spending and learning to live within these limits.
However, it is not simply enough to enact tough austerity measures. It is also crucial that governments examine their sources of tax revenue and identify those which can be increased. There is significant public pressure to increase taxes on the wealthy but they would do more to decrease inequality than to reduce the deficit. Any tax increases will need to affect a large proportion of the population to make a dent in the budget. If we combine modest tax increases with cuts, as the Chrétien government did in the late 1990s, then we can put our financial houses in order.
There is a progressive case to be made for austerity. However, this is only true if austerity is taken to mean not only cuts but also new efforts to raise revenue. Neither the left nor the right have the complete answer to the question of how to deal with a mounting deficit and the ballooning cost of social programs. Instead, what we need is a moderate approach that does what needs to be done to preserve and protect the services that we hold most dear.
