Irresponsible Budgetary Policy

Vrij Nederland
Erasmus School of Economics

‘The upheaval in fiscal policy could not have been sharper. In ten years, obsessed accountants have been driven out by politicians who hand out free beer. This must stop as soon as possible. Otherwise, there will be financial accidents again.’ Bas Jacobs, Professor of Public Economics at Erasmus School of Economics, advocates breaking open the coalition agreement again in Vrij Nederland (20 April 2022) and NPO Radio 1 (22 April 2022).

Inefficient policy during the financial crisis

During and after the financial crisis, the Netherlands developed itself as the strict bookkeeper who lectured other counties on the importance of tough budgetary discipline. The government enforced budget cuts of over 46 billion euros during the biggest economic crisis the Netherlands went through since the Great Depression.

Jacobs argues that these strict budget cuts during the deep financial crisis was not responsible economic policy since this only enlarged the drop in aggregate demand. The economic damage was huge. For instance, employment dropped with 365.000 people.

Upheaval in policy 

The Professor notes that the Covid-pandemic resulted in a sharp upheaval in budgetary policy. Suddenly, money was no longer an issue. The government Rutte IV has increased the government expenditures with 75 billion euros in one government term. And, due to political pressure, this number will rise with approximately 20 billion euros.

The Professor observes a link with the government’s budgetary policy after the financial crisis. Again, irresponsible economic policy is being conducted. Public money is being squandered on inefficient policies, of which the higher income groups in society benefit the most. Moreover, the government is making a lot of demand sided impulses in the economy, while the supply side is stagnating. Continuing with this stimulating policy will only further increase the already sky-high inflation.

Conclusion

If Sigrid Kraag wishes to succeed as minister of Finance, then she has to break open the coalition agreement again, says Jacobs. He concretely advices several points to get rid of inefficient economic policies and prevent financial accidents.

Professor
More information

For the whole item by Vrij Nederland, 20 April 2022, click here.

For the whole item by NPO Radio 1, 22 April 2022, click here.

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