Further to that last point, here is Paul Krugman's take on fiscal policy and the economy. He's talking about the U.S., but our economic fortunes are tied to theirs, like it or not:
http://www.nytimes.com/2008/12/01/op...gman.html?_r=1
Krugman is a pretty well-respected economist. He won one of those Nobel Prize thingies. My inclination is to think he knows what he's talking about. Note in particular the historical argument:
Quote:
The idea that tight fiscal policy when the economy is depressed actually reduces private investment isn’t just a hypothetical argument: it’s exactly what happened in two important episodes in history.
The first took place in 1937, when Franklin Roosevelt mistakenly heeded the advice of his own era’s deficit worriers. He sharply reduced government spending, among other things cutting the Works Progress Administration in half, and also raised taxes. The result was a severe recession, and a steep fall in private investment.
The second episode took place 60 years later, in Japan. In 1996-97 the Japanese government tried to balance its budget, cutting spending and raising taxes. And again the recession that followed led to a steep fall in private investment.
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