Friday, November 21, 2008

19 Words to Remember

"The weak fiscal performance to date is largely attributable to previous policy decisions as opposed to weakened economic conditions."
-Parliamentary budget officer Kevin Page

Because it's never too early to start preparing attack ads for the next election campaign...

UPDATE: On QP today, Kevin Page says (after being somewhat directed there by Oliver) that the government should have seen this deficit coming during the election campaign...


  • Why wait until the next campaign?

    By Blogger Robert McClelland, at 10:52 PM  

  • Isn't it shameful? harper is supposed to be a trained economist.

    By Blogger JimTan, at 11:52 PM  

  • Conservative Women Say: "No Worries!"

    By Anonymous Anonymous, at 5:11 AM  

  • Yes they are - the Party of Fiscal Irresponsibility

    By Anonymous Anonymous, at 10:25 AM  

  • I don't endorse Harper's overall economic package, but the budget officer is wrong. The plan of throwing extra billions of dollars at the provinces and cutting taxes kept Canada out of recession far longer than any other developed country.

    If not for problems in the US finanical system finally leading to a global credit crunch in September, Harper's moves would have likely kept Canada out of a recession. i.e. Harper moves provided continued stimulus for the last two years which delayed the effects of the slowing economies in the developed world impacting Canada.

    We are in the midst of adeflationary scare at the moment, and the only way to prevent a deflationary depression in Western economies will be for Western governments to spend massively on infrastructure, and next generation technological infrastructure.

    The private sector is seizing up in fear, and money velocity is slowing down as individuals hunker down. If fear is allowed to take hold, there will be no way to prevent a deflationary depression, perhaps as bad as the thirties. This is where individuals acting collectively led by their government have to overcome the fear and be willing to create aggregate demand with government spending if necessary to get private money and wealth moving again.

    By Blogger whyshouldIsellyourwheat, at 1:12 PM  

  • Didn't the Liberals allow the budgets containing tax cuts to pass? The NDP would have some credibility with attack ads, but only a few Liberal partisans would think the Liberals might. Are the Liberals using their upcoming oppostion days to try and bring in a bill to raise the GST?

    By Blogger nuna d. above, at 1:23 PM  

  • Wait, does "previous policy decisions" refer to the last 3ish years or the (I can't believe I'm going to say this) "13 years" before that? Isn't he being purposely vague to avoid putting the blame on one or the other?

    By Anonymous Jeremy, at 3:31 PM  

  • Jeremy - he goes on to specifically point to Harper gov decisions (like GST cuts) so that's what he's refering to.

    By Blogger calgarygrit, at 4:23 PM  

  • Yeah, it's considered "irresponsible" in Canada to leave even a thin dime in taxpayers' pockets. Especially those taxpayers who don't have enough income to have to pay income tax.

    By Blogger paul.obeda@, at 5:24 PM  

  • //Jeremy - he goes on to specifically point to Harper gov decisions (like GST cuts) so that's what he's refering to.//

    The Canadian economy would have already been in recession is not for the tax cuts. Those GST cuts saved a lot of retail jobs, because they occurred as the Canadian dollar was rocketing upwards.

    The amount the governments around the world are going to spend over the next few years and the deficits that are going to be run to stave off a deflationary depression is going to mind-boggling.

    The Liberal economic critics are currently fighting the last war. Obama's first budget is going be a shock-and-awe of infrastructure spending and aid to the States, It will likely have a trillion dollar deficit attached to it. Criticizing Harper for running deficits and for stimulating the economy is going to sound awfully silly and awfully out of touch with reality really soon.

    Harper will point the the multi millions the Martin government gave to GM to build the gas-guzzling Camaro sportscar, and to Chrysler to build the gas-guzzling Charger sportscar, when he signs on the Obama's plan for the auto industry.

    By Blogger whyshouldIsellyourwheat, at 5:27 PM  

  • Jeremy - he goes on to specifically point to Harper gov decisions (like GST cuts) so that's what he's refering to.

    So, the next Liberal campaign will not include promises to "scrap", but to increase the GST. Politically brave, but the right thing to do.

    By Blogger Möbius, at 5:44 PM  

  • Cutting the GST was a political decision, not an economic one. It looked like a cheap trick at the time, but now we're discovering the true cost.

    I just don't buy the argument that Harper's actions protected the economy from recession, or that he had any particular motivation beyond electoral success.

    Just because Harper's a trained economist doesn't make him a good economist. As the saying goes, if you laid all the economists in the world in a straight line, they wouldn't reach a conclusion.

    Our economy, for better or worse, is primarily based on resource extraction; increased demand from the "less-than-developed" or emerging economies (i.e. China, India) has led to increased markets for resources, which has led to our currrent strength.

    Do you really think domestic demand, in a market of only 33 million people, has that strong an effect in an export oriented economy?

    Admittedly off the top of my head, if I was looking to increase tax revenue, I would impose a luxury tax on items priced beyond a given percentage of a averaged income. Yes, the truly wealthy would scream, but given the current economic climate, I doubt that there would be much sympathy for people who spend more on a watch or a bottle of wine than some people earn in a year.

    By Blogger Party of One, at 7:18 PM  

  • 2% off the price of goods does not a stimulus package make. The vast amount of money that the lower and middle class spends is on items that are not effected by GST -- basic groceries and their home.

    Trust me, nobody noticed the extra 3 cents they saved on that listeria tainted sandwich from the store.. hell, they probably dropped the pennies in the parking lot. They certainly didn't get up and say, "Golly Martha! With that extra 2% cut off the GST, we can go on a spending spree, woohoo!"

    But through the economies of scale, the government sure does notice that lost three cents. To the tune of eliminating our contingency fund which was in place for exactly such situations as this.

    Now, who do I wager is probably wrong, some random Harper groupie with a hate on for the CWB, or an economist who's been working for the government for 25 years, able to get information from all departments and with government accountants, book-keepers, and economists all present to provide assistance in generating this report.

    Hmm.. tough one.

    By Anonymous Anonymous, at 11:13 PM  

  • Hey, maybe the federal Cons going to take a page from Ed Stelmach's book and start blaming the current economic problems on Pierre Trudeau....

    ... snicker.

    By Anonymous rc, at 11:31 PM  

  • Hey, maybe the federal Cons going to take a page from Ed Stelmach's book and start blaming the current economic problems on Pierre Trudeau....

    They haven't already?

    By Anonymous Frank trudeau, at 12:01 PM  

  • "I'm not going to be the Finance Minister who puts our government back into deficit" - Jim Flaherty, February '08

    By Blogger Rob, at 12:20 PM  

  • Liberals channelling R.B.Bennett and Herbert Hoover is not a winning strategy.

    Quit fighting the last war. The world is staring into a deflationary abyss.

    Governments the world over are going to spend to create aggregate demand and to overcome the fear in the private sector that has seized up the velocity of money.

    By Blogger whyshouldIsellyourwheat, at 12:56 PM  

  • Deficit Steve's blunders were not the tax cuts. It was the tax cuts PLUS the record breaking government spending PLUS the evisceration of the Liberals contingency fund WHICH WAS SET UP SPECIFICALLY FOR THIS TYPE OF ECONOMY.

    This is where ideological rubber meets the road and in Deficit Steve's case leaves a lot of that burnt rubber stink. Unfortunately, we voters are the one's getting burned.

    Question: how much of our tax dollars are now going to go to Chinese and other foreign investors who will be financing Steve's deficit????

    By Blogger Ted, at 5:45 PM  

  • 1. Short-term deficits don't matter, structural deficits (eg. deficits while the country is at full employment) do.

    2. Paul Martin ran on [income] tax cuts and increased government spending (Kelowna accord, etc.). He was assuming continued budget growth and a surplus.

    3. Stephane Dion (and all of the opposition parties) ran on far greater spending increases than the Conservatives in the last election.

    4. The few times the Conservatives did make spending cuts (they should have done it more), nobody cried bloody murder faster than the left. You folks just made a cause celebre out of the notion that arts spending wasn't increasing fast enough in the last election. The Tories were attacked for forgetting the wait times guarantee, not doing enough on the environment, not following through with Kyoto (which would have cost billions in the purchase of emissions credits). The Tories were not fiscally responsible, but they were a fat lot better than the alternatives (unless the alternatives would like to come out of the closet as liars).

    5. So if Paul Martin's after the fact logic is correct, why did HE cut taxes? I mean if the main predictor of economic strength is that the government is in a surplus totaling 1% of GDP (at its height), rather than a deficit of .001%, why didn't his government just relentlessly raise taxes all the time.

    By Blogger hosertohoosier, at 7:11 PM  

  • "Liberals channelling R.B.Bennett and Herbert Hoover is not a winning strategy."

    Bennett and Hoover were conservatives.

    By Anonymous rc, at 7:33 PM  

  • The Liberals promised the same cuts in tax revenue through income tax cuts rather than the GST cut. So, are they saying now that they were wrong too?

    By Anonymous Anonymous, at 10:25 PM  

  • Don't be daft, anon 10:25.

    First, a consumption tax and income tax are very different and are affected by the consumer economy differently. If people are only starting to lose jobs now, their income taxes (and government revenue) would only be affected later, giving the government time to tweak revenues and adjust spending. If people stop spending, that affects revenues immediately.

    Second, let me repeat the very obvious and more important point: Deficit Steve's blunders were not the tax cuts. It was the tax cuts PLUS the record breaking government spending PLUS the evisceration of the Liberals contingency fund WHICH WAS SET UP SPECIFICALLY FOR THIS TYPE OF ECONOMY. Do any one of those right and we don't have a deficit. Go blindly and irresponsibly into ALL THREE and a deficit is inevitable.

    By Blogger Ted, at 10:43 PM  

  • // It was the tax cuts PLUS the record breaking government spending PLUS the evisceration of the Liberals contingency fund WHICH WAS SET UP SPECIFICALLY FOR THIS TYPE OF ECONOMY.//

    Obama is going to be running nearly trillion dollar deficits for most of his first term. The Canadian economy is roughly a tenth of the size of the US economy, so those deficits would correspond to a hundred billion dollar defisits in Canada.

    Canada's share of the big three automobile bailout is likely to be at least $5 billion.

    The deficits that Canada are going to run in parallel to support Obama's and the world's economy recovery plan are ultimately going to be in the tens of billions of dollars. Whether a puny $3 billion contingency fund exists or not demonstrates a complete lack of understanding of the scope of the economic crisis the world faces.

    The billions that Harper has pre-emptively doled out to the provinces will be seen as prescient, since Canadian provinces will be in much better fiscal shape heading into the crisis than American states will be.

    I believe that Gordon Brown and Alistair Dowling are about to announce a cut in Britain's value-added-tax (their version of the GST). You know the Gordon Brown who pressured Europe and the States about the correct way to bail out the banking system a couple of months ago. And last time I checked, they were a Labour government, cutting their bloody VAT..

    The game has changed. The Liberal Party has to change its rhetoric pretty soon, and be willing to put forward constructive ideas in response to this crisis rather than criticize Harper for running deficits, which will be the correct thing to do, which will be what Obama and the entire world will be doing.

    By Blogger whyshouldIsellyourwheat, at 12:26 AM  

  • Someone may also wish to send a note to your New Liberal compatriots across the pond, where Gordon Brown has announced - wait for it - a VAT cut as fiscal stimulus.

    By Blogger paul.obeda@, at 6:20 PM  

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