Of economic stimulus and austerity

With all of the economic turmoil going on in the world, the terms “austerity” and “stimulus” continue to be bandied about. It is time for some understanding of these words. Winthrop Quigley recently reported on comments by an analyst from Bank of the West who argued against the US adopting “European-style austerity measures” lest they harm our economy. OK, well, if “austerity” means massive tax hikes, I agree with him, but if it means spending cuts as happened in Canada, it seems hard to argue that such “austerity” is not needed. See the chart below on Canada’s massive spending reduction:

Besides, if “stimulus” means engaging in deficit spending to stimulate the economy, the US government has been “stimulating” the economy for decades now.

By way of illustrating the wasteful nature of government “stimulus” spending (which, after all is the “whole point”), I thought this cartoon was appropriate:

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