The document analyzes government austerity measures, emphasizing their role in fiscal management and control of public-sector debt. It highlights case studies from Ireland and Canada, illustrating potential economic recovery or risks associated with such measures. Additionally, it discusses broader issues in global economic growth and strategies governments might adopt to manage debt and deficits effectively.

1. Austerity Measures -
Government Fiscal Management
- Analysis and Trends - June
2016
By: Paul Young, CPA, CGA

2. Disclaimer
• This presentation discusses the practices of austerity measures by
government as part of their fiscal management cycle

3. Paul Young - Presenter
Bio
• CPA/CGA
• 25 years of experience in Academia, Industry and Financial solutions
• Youtube Channel -
https://www.youtube.com/channel/UCAArky1bAXPSuV2NLtUnyLg

4. Agenda
• What is austerity?
• Ireland
• Canada
• Issues with Austerity
• What government should do to manage debt and deficits?

5. Austerity
• Austerity measures are attempts to significantly curtail government
spending in an effort to control public-sector debt, particularly when
a nation is in jeopardy of defaulting on its bonds.

6. Why are government hesitant with Austerity
measures
• Government spending is part of GDP which means reduction in
government spending can hurt economic growth
• Deep cuts can extend recessions and make things worst for both the
private sector as well as the delivery of program spending
• Weak private sector
• Low business investment
• High unemployment
• Slow domestic and international market for business

7. Success of Austerity / Ireland
• In the immediate wake of its austerity plan, Ireland’s economy expanded slowly during the 2010-12
period. However In 2014 the Irish economy grew at a pace of 4.8%, making it the fastest-growing
country in the European Union, and with a faster growth rate than the United States in each year
since the Great Recession. The Irish economy grew 1.9 % for the second quarter ending in June of
2015, following an upwardly revised 2.1% expansion in first quarter of 2015—which was way above
Krugman’s and the market’s expectations.
• Ireland achieved this growth while dragging their budget deficit down to 4.1% of GDP, from the 14.3%
in 2008. The country was also the first Eurozone country to exit a rescue program by the IMF.
Ireland’s seasonally adjusted jobless rate fell below 9% for the first time since 2008, to 8.9% in
October of 2015. For a fleeting moment in December 1989, the Japanese stock market (Nikkei 225)
surpassed the U.S. market in size as it hit its peak at 38,916 and a P/E ratio of 80 times; Japanese real
estate accounted for half the value of all land on earth at US$24 trillion. When Japan’s real estate and
stock market bubble burst the Japanese were diligent Keynesians embarking on spending programs in
the 1990’s totaling more than 100 trillion yen. Where has all this spending gotten Japan? Two and
one half consecutive lost decades and counting.
• Much to Krugman’s delight, in 2012 the Japanese embraced Abenomics, an economic strategy that
doubled down on the same specious spending and money printing the Japanese were already
engaged in. With one of Abe’s three arrows directed at increasing government deficit spending,
Japan is currently running a budget deficit that is 8% of GDP. With another arrow aimed at currency
destruction to goose exports. However, we just learned that Japanese exports fell in October for the
first time in fourteen months. And in fact, the only target Abe’s arrows appears to be accurately
hitting is a recession.
• Most recently, the Japanese economy shrank 0.2% for the September of 2015 quarter and has been
unable to provide a sustainable recovery in GDP growth since the end of the Great Recession.

8. Canada / Austerity
• In 1990s the Canadian Debt to GDP was very high
• The government instituted austerity measures
• Cut transfers to the provinces (Healthcare and Education)
• Reduced government spending
• Re-visited EI as well as other liabilities by changing the rules
• Surplus from EI were taking into general revenue as part of deficit/debt fighting
• Risks
• Cuts to transfers force provinces to cut transfers to healthcare and/or raise taxes
• Delay payments to future period in hope the fiscal management cycle would improved in
terms of revenue.

9. Are there risks to Austerity Measures in the
world?
• Many governments are struggling with both high deficits as well as debt to gdp
• Slow world-wide growth 3.1% for the next five years or more
• Business Investment
• Slow investment into capital (automation)
• Low commodity prices
• Low consumer demand
• Government bring in bad policies
• Cap and Trade
• Hikes to consumption taxes
• Subsidies to wind, solar, smart grid, etc
• Subsidies to help businesses (picking and choosing winners)
• No grasp of value for money (i.e. cost of delivering programs)
• No grasp of consumption tax collection (impact of eCommerce)

10. What can government do to control debt and
deficits• Revenue
• Consumption Tax
• Move away from sales tax to consumption tax
• Excise
• Taxation programs (elimination of duties and excise taxes)
• Payroll
• Freeze or hold the line to social security increase to inflation
• Maximize retirement returns via independent oversight
• Maximize EI returns by maximizing returns
• Corporate Tax
• Tax code changes, i.e. streamlining
• Implement OECD recommendation on tax avoidance
• Tax treaties with countries
• Costs
• Cost of delivery
• Arbitration settlement
• Freezing the grid
• Re-aligning compensation with that of private sector
• Pension reform (elimination of define benefits and move to defined contribution)
• Institute value for money and comprehensive audit to all departments and agencies
• Selling off assets
• Reducing the size of government
• Lean and mean
• Collapsing duplicate departments

11. Sources
• Contact: paul_young_cga@Hotmail.com
• Socialism - https://www.youtube.com/watch?v=2r3kdD5fuEc
• Socialism - https://www.youtube.com/watch?v=lmU2sYkJkTc
• Socialism - https://www.youtube.com/watch?v=fhk2b97BYKU
• Socialism - https://www.youtube.com/watch?v=TulkPgfR-R0