Any minor difficulty with inflation later down the track is no reason to axe the economic stimulus, including the expenditure on economic and social infrastructure. Such programs provide for human well being and may expand economic capacity in the future. Again in The Age, Tim Colebatch has quoted Max Corden: “One is not causing a flood by hosing down a fire.”
Powerful words indeed.
And indeed, the qualitative improvement in living standards which might follow with some programs of expenditure, such as Australia’s “National Broadband Network”, is greater than any purely quantitative economic indicator can express.
Further, some areas of public spending comprise a genuine and important human need while requiring only a “one off” major investment. Investment in social housing especially addresses a critical problem in Australia of homelessness. Increasing supply in the housing market would also prevent the rise of another housing bubble while driving down rental costs for vulnerable Australians. Cutting back on such programs under such circumstances - to reduce the budget deficit - does not make sense.
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Without sustained stimulus, the world economy could again nosedive. Hence Stiglitz has also suggested the possibility of a “W-shape” recession. Without sustained stimulus recovery could be temporary followed by a lapse back into recession.
Now is not the time to withdraw economic stimulus. In Australia, the US and elsewhere we need continued and decisive action to support the world economy. But we also need to address qualitative concerns which relate to the economy, not deceptive readings based purely on economic quantity.
The struggle for health care reform in the US is precisely one such issue and we should all support the Obama Administration in its endeavours to achieve change. If anything we need to revisit the kind of mobilisation achieved by the Obama team in its election campaign, to ensure that as comprehensive a public health care program as is possible is achieved in the United States.
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