A story on how balanced budgets have been the keystone of the Canadian recovery, an upturn in sharp contrast to the circumstances in the US to the south. The article is by Brian Lee Crowley, the head of the McDonald-Laurier Institute, and published in the Globe and Mail. From which this:
We have a lot of cases available to us to test the proposition that we will increasingly be hearing that balancing the books is over-rated. If the all-stimulus-all-the-time Keynesians are correct, for example, France should be the strong man of Europe, for its Socialist president came to power rejecting “austerity” and preaching the virtues of stimulus. Britain, which pursued a course of fiscal discipline under the coalition government of David Cameron, should be in steep decline.
Instead the head of the International Monetary Fund, Christine Lagarde, recently had to apologise to Britain’s Chancellor of the Exchequer for having wrongly warned that his austerity policies would provoke disaster, as Britain turns in one of the strongest economic performances in the EU. Overtaxed and tapped out France, by contrast, continues to be the sick man of Europe. Interviewed on British television Ms Lagarde acknowledged that Britain’s growth seems “pretty sustainable” because it depends on private sector investment and consumer spending.
Economic theory of the Y=C+I+G variety has a lot to answer for. The evidence keeps mounting that balanced budgets accompanied by limited growth in public spending are the key to prosperity even while the opposite evidence, that budget deficits and large increases in public spending drag an economy down is everywhere to be found (see the US for exhibit A on the harm debt and deficits cause). Canada and the UK have become prime examples of how private sector growth, fostered by what others choose to call “austerity”, actually does create the foundations for economic growth.