AltAusterity Digest #73 November 8-14, 2018

The Italian coalition government has decided to stick to its budget deficit target of 2.4%, with 1.5% growth projected, despite objections from the European Commission. The decision to not follow the EC’s guidelines for deficit spending and debt targets could result in fines for the Italian government. The first draft of the Italian budget was rejected by the EC last month under a challenge to EU budget rules. The European Union is in a difficult scenario, as allowing Italy to flout budget rules would demonstrate an inability to enforce fiscal discipline, while cracking down on Italy could strengthen the position of the anti-immigration League party and the Eurosceptic Five Star movement.

Analysis from Cardiff University in Wales has found that spending on public services will not return to pre-austerity levels until 2023. This means that the day-to-day spending of the Welsh government will have stagnated for a 13-year period. When considering population growth, even a matching of spending adjusted for inflation to 2010 levels will not be equivalent in spending per capita. While Welsh Finance Secretary Mark Drakeford does have the power to vary some taxes and to borrow money, the Welsh Labour party has promised not to change income tax rates before 2021.

On Tuesday, Amazon announced its plans to split its second headquarters, “HQ2,” between Queens, New York and Arlington, Virginia. While Virginia lawmakers routinely welcomed the decision, New York Democrats have been split between pro-corporate and progressive officials. To attract the tech giant, New York has offered more than $2 billion in incentives from state and local governments. Democratic Representative-elect Alexandria Ocasio-Cortez, whose district covers parts of Queens and the Bronx, voiced concerns over subsidizing one of the largest corporations in the world at a time when local infrastructure investment is desperately needed. State assemblyman Rom Kim also plans to introduce legislation to cancel subsidies to Amazon, and instead redirect the tax breaks to student debt relief.

According to the U.S. Treasury Department, the U.S. deficit reached $100.5 billion in October, an increase of 59% over last year. While the government has run a deficit in every October since the early 1950s, the $1.5 trillion in tax cuts Congress approved last December has significantly contributed to the massive jump in the government shortfall. The last time the government ran deficits equivalent to last month’s totals was during the recovery period after the 2008 crisis when the U.S. utilized massive stimulus packages and bailout funds. Trump has said that his administration will produce a “tough budget” for the new year, including a 5% spending cut for domestic agencies.

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