'Rutte should spend more money'

In the radio show of Veronica Inside on Wednesday 26 June 2019, Wilfred Genee talks to Bas Jacobs, Sijbren Cnossen Professor of Public Economics at Erasmus School of Economics. During this interview, Professor Bas Jacobs shares his opinion about the budgetary policy of the Dutch government.

Recently, Coen Teulings, former director of the CPB Netherlands Bureau for Economic Policy Analysis, said that the Dutch Prime Minister Mark Rutte should not be afraid to spend more money. Bas Jacobs, Sijbren Cnossen Professor of Public Economics at Erasmus School of Economics, fully agrees: "It would be very late, however, if Rutte now suddenly changes his policy vision after 10 years. Nevertheless, it would be very valuable if he finally would acknowledge that the budgetary policy of the Dutch government is not effective." During the crisis, the Dutch government conducted a restrictive budgetary policy, in which it had cut back on many expenses and increased taxes sharply. According to Bas Jacobs, this policy has severely damaged the Dutch economy and the Dutch economy could have grown a lot more if the government would not have conducted such a strict policy. 

Eventually, the Dutch government caused 1/3 of the crisis itself, because of its strict government policy, says Professor Jacobs: "Neither Europe, nor the decrease in world trade has had such a big effect on our economy." Today, we are witnessing the same as taxes are still rising. The government puts the purchasing power of households and the profits of corporates under pressure in order to stabilise its own budget. However, this budgetary discipline does not seem fit any longer, especially if we look at the interest rates. The Dutch government can lend money almost for free, since interest rates are negative. So why does the Dutch government not lend any money on the financial markets? The market gives a signal that we now should, and we could use that money to invest in the energy transmission, education or research & development. Nevertheless, the politicians in The Hague seem to be obsessed with reducing the government debt instead of investing in our economy. 

 

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Listen to the entire podcast (in Dutch) on Veronica Inside, 26 June 2019