Mario Seccareccia - Why Governments Should Run Deficits Now

What do nearly all governments have in common these days? They all are struggling to reduce fiscal deficits. Clearly, they are not listening to the advice from Mario Seccareccia, who says: Fiscal deficits? That's what we should be aiming for.

In this INET interview, Mario Seccareccia describes what he calls a "new consensus" on macro policy. The consensus relies on central bankers to run the economy, to lower the interest rate in a slump and increase the interest rate when inflation is mounting. Fiscal policy is seen as fallback, something to be avoided and employed only in the event when monetary policy has lost its grip.

Mario Seccareccia, Professor of Economics at the University of Ottawa, takes issue with the new consensus; instead, he proposes to stabilize the economy through fiscal policy. The government steps in when private spending slacks and retreats in a boom when inflation is looming, to get steam out of the system. That's functional finance.

Our economy, Seccareccia says, is credit-driven -- you have to go into debt in order to grow. When firms undertake investment, they borrow, and governments should do the same, he suggests. They should borrow, not for consumption, but for productive investments in education, health care, and infrastructure.

Enjoy the video!