Tuesday, December 8, 2015
Denmark's Conservative Government Is Off To A Bad Start
Corporate revenues and profits often fail to meet quarterly targets. They often respond by asking their managements to cut spending in order to protect profits. It would appear that the government of Denmark is taking a similar approach in order to reduce its budget deficit which is 3.3% of GDP. The head of Denmark's energy department has ordered a large cut in its renewable energy budget. He is doing his part to reduce the budget deficit and he believes that reducing the deficit will stimulate the Danish economy which has been in the doldrums. Denmark has been a leader in renewable energy and its exports stimulate economic growth. It also produces jobs which increase tax revenues. In other words, it seems foolish to cut its energy budget in the hope that it will reduce the budget deficit and stimulate economic growth. Apparently, the conservative government believes in the doctrine of expansionary contraction which has affected many countries in Europe. Nations like Denmark, which can borrow money at close to zero, should run budget deficits when consumer spending and business investment have been contracting. Cuts in government spending will shrink the economy.
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