April 16, 2020
The COVID-19 pandemic has been a tumultuous time for both the health and wealth of all Manitobans.
However, Premier Brian Pallister’s and Mayor Brian Bowman’s dangerous plans to reduce non-essential government spending during this pandemic — such as laying off workers or reducing government pay to just two days a week — will badly damage our economy.
The 2008 financial crisis showed that a better plan is to increase spending during this pandemic.
People often falsely use the analogy of a province or country being akin to a family — if a family has less income, then it should cut back on its expenses. However, a province is not a family — every dollar that the province saves is a dollar (or more) that someone else in the province will not earn.
In economics, this is called the paradox of thrift. If everyone in the Manitoban economy cuts back spending, then everyone’s income will fall — and as everyone’s incomes fall, spending will once again fall, triggering a vicious cycle. Paul Krugman, 2008 Nobel laureate in economics, noted these exact same problems with austerity following the financial crisis.