Dublin Council of Trade Unions

Reason 2: Austerity is Not Even Cutting the Deficit

Is austerity working?  Clearly, it is driving up unemployment, emigration and deprivation while cutting incomes and living standards.  But supporters of austerity say this is the price we must pay to get our deficit under control.  The problem is that austerity is not even cutting the deficit.

Since the crisis began, there has been €24 billion[1] in austerity measures – spending cuts and tax increases.  But the underlying deficit (that is, excluding special bank payments and income) has actually increased since 2008.  And since 2009, when the big austerity measures started, the deficit has only fallen by €3.5 billion.

€24 billion in spending cuts and tax increases to produce a deficit reduction of €3.5 billion?   Would anyone call that ‘value for money’?

Put another way, the deficit has fallen by only 2 percentage points of GDP.  Now, imagine if the Government spent €24 billion to reduce unemployment and it only ended up cutting unemployment by 2 percentage points.  There would be an outcry – a waste of money, incompetent policy, spendthrift.    And that would be correct.

But when the Government ‘spends’ €24 billion to cut the deficit and it only reduces the deficit by 2 percentage points, all we get from supporters of austerity is – cut more.  That’s because many supporters of austerity are using the crisis for their own political agenda – to cut public services, social protection and public investment.

Why should we march?  Because austerity is not working; its not even cutting the deficit.  But it is cutting us.  And it should stop.

[1] Some calculations put the level of fiscal adjustment up to €24.9 billion.  The figures used here are from the ESRI’s latest Quarterly Economic Commentary

Download PDF: Reason 2 deficit


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