rabble blogs are the personal pages of some of Canada's most insightful progressive activists and commentators. All opinions belong to the writer; however, writers are expected to adhere to our guidelines. We welcome new bloggers -- contact us for details.

Stimulus vs. public investment

Please chip in to support more articles like this. Support rabble.ca for as little as $5 per month!

A column by Stiglitz in the Financial Times makes what I think is an important point.

The current debate over fiscal policy for the U.S., Europe and Canada is often characterized in the media as one between advocates of higher deficits from Keynesian style stimulus measures, and advocates of lower deficits through public sector austerity. Within this frame, the advocates of austerity are, of course, generally portrayed as "fiscally responsible."

While progressive economists in the current context of very weak recovery certainly favour measures to create jobs and expand demand, which may entail increases in short-term deficits, the real need is for a sustained public-investment-led recovery. Beyond jobs now, we also need investments to boost medium and long-term potential growth. Higher growth will reduce debt in a far more positive way than up front spending cuts.

New public investments can also be financed through fiscal measures, notably progressive tax reform, which have a neutral impact on the deficit, but positive impacts on output and jobs.

Stiglitz writes:

"(t)he real answer, at least for countries such as the U.S. that can borrow at low rates, is simple: use the money to make high-return investments. This will both promote growth and generate tax revenues, lowering debt to gross domestic product ratios in the medium term and increasing debt sustainability. Even given the same budget situation, restructuring spending and taxes towards growth -- by lowering payroll taxes, increasing taxes on the rich, as well as lowering taxes for corporations that invest and raising them on those that do not -- can improve debt sustainability."

In my presentation to the PEF sessions at the recent CEA meetings, I spoke to three major areas of public investment that could significantly boost potential output, generate high rates of return and be close to self- financing for governments. These are investments in basic transportation infrastructure; in mass transit, and in childcare and early learning. High returns are indicated by the mainstream economics literature. Other examples could be added.

It is fiscally irresponsible not to make major public investments which can be financed at record low interest rates, would generate immediate jobs, would boost our medium-term growth prospects, and which would lower rather than increase public debt.

This article was first posted on The Progressive Economics Forum.

Thank you for reading this story…

More people are reading rabble.ca than ever and unlike many news organizations, we have never put up a paywall – at rabble we’ve always believed in making our reporting and analysis free to all, while striving to make it sustainable as well. Media isn’t free to produce. rabble’s total budget is likely less than what big corporate media spend on photocopying (we kid you not!) and we do not have any major foundation, sponsor or angel investor. Our main supporters are people and organizations -- like you. This is why we need your help. You are what keep us sustainable.

rabble.ca has staked its existence on you. We live or die on community support -- your support! We get hundreds of thousands of visitors and we believe in them. We believe in you. We believe people will put in what they can for the greater good. We call that sustainable.

So what is the easy answer for us? Depend on a community of visitors who care passionately about media that amplifies the voices of people struggling for change and justice. It really is that simple. When the people who visit rabble care enough to contribute a bit then it works for everyone.

And so we’re asking you if you could make a donation, right now, to help us carry forward on our mission. Make a donation today.


We welcome your comments! rabble.ca embraces a pro-human rights, pro-feminist, anti-racist, queer-positive, anti-imperialist and pro-labour stance, and encourages discussions which develop progressive thought. Our full comment policy can be found here. Learn more about Disqus on rabble.ca and your privacy here. Please keep in mind:


  • Tell the truth and avoid rumours.
  • Add context and background.
  • Report typos and logical fallacies.
  • Be respectful.
  • Respect copyright - link to articles.
  • Stay focused. Bring in-depth commentary to our discussion forum, babble.


  • Use oppressive/offensive language.
  • Libel or defame.
  • Bully or troll.
  • Post spam.
  • Engage trolls. Flag suspect activity instead.