Crawl Across the Ocean

Friday, February 15, 2008

These Are Not Serious People

From today's Globe business section:

"While Canada should weather the deepening U.S. slowdown, Jim Flaherty said he's increasingly concerned about Ontario, the country's largest economy. And he urged the provincial government to curb spending and cut taxes to spur economic activity."
[emphasis added]

You know, you won't find many topics that pretty much every economist agrees on, but the concept that cutting spending does not help you fight an economic downturn would certainly make the list.

What Flaherty said may not immediately sound crazy, thanks to the constant droning of one-track-mind folks who think there's no problem that can't be solved by spending less money on health, education, research and infrastructure, but it really is pretty crazy. You might as well have the head of the Canadian Medical Association explain how his patient had a fever so had to do some old-fashioned blood-letting, and you'd be at about the same level of professional competence. And this Flaherty clown used to be Finance Minister of Ontario which was a total disaster which won't fully be undone until the end of the highway 407 contract (in 2098, maybe your kids or grandkids will be alive to see it). This is a guy who locked his province into a terrible deal for 99 years, who managed to pile up a huge deficit during an economic boom - and what happens? He goes on to become Finance Minister for the whole country.

Let's face it, we're screwed. If George Bush's 8 years of being the worst president in the history of the United States proved anything, it's that having incompetent people run your country has serious consequences. Let's just hope we don't have to learn the same lesson quite as painfully.

The whole situation puts me to mind of this classic old Kung-Fu Monkey post on how he missed the good old days when the local right wing party was actually made up of grown-ups with serious opinions about things based on knowledge and evidence.

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  • At least it's 'curb spending and cut taxes' rather than just 'cut taxes and go into deficit', we still have that over the US...

    By Anonymous V, at 10:41 PM  

  • There's nothing wrong with going into a short term deficit during a downturn. It's entirely appropriate in fact.

    The worst part of all this is that Harper and Flaherty think of themselves as hard-nosed economic "realists", when they're really nothing more than incompetent ideologues who evidently would argue that the best cure for a recession is for major organizations to spend and invest less. If Flaherty were to give a speech arguing that Company X should cut production to "spur economic activity", he'd be laughed off stage.

    Well, even worse is the apparent conventional wisdom that the Conservatives are seen as better economic managers - this seems to exist in the media, and I cannot for the live of me figure out why, nor can I fathom why the Liberals are not running hard on the economic angle - they can largely take credit for the current fiscal situation (now frittered away by Harper), and at least presiding over many years of growth. Of course, if they defeat the budget on grounds of the "economy", I think they'd be able to frame the campaign fairly well.

    By Blogger Josh Gould, at 11:07 PM  

  • "You might as well have the head of the Canadian Medical Association explain how his patient had a fever so had to do some old-fashioned blood-letting....."

    Well, not sure even an orthopod would recommend that, but that doesn't mean that the current head of the CMA has any problem promoting a practice that has recently been plagued with forced organ-letting problems:

    Brian Day, head of the Canadian Medical Association, has called for more private investment in health care to get rid of wait times, saying Canada could then become a medical tourism destination itself.

    "This could become a major industry," Day says, especially for smaller provinces.

    By Blogger Gazetteer, at 2:27 AM  

  • Hello

    Curbing spending may not help the economy or the general population with an economic downturn but it could help the provincial government itself avoid going into a deficit that Mr Flaherty could argue he (and his successors) had left the province unable to afford. Of course, for that purpose they should raise taxes.

    Best Wishes,

    By Anonymous Anonymous, at 4:37 PM  

  • The best part of that is that a sizable portion of the government's spending is driven by federal transfers. If they stop that it pretty much eliminates the whole conservative record.

    By Anonymous Anonymous, at 11:57 AM  

  • Would you have supported government spending cuts (let's say 15 billion) in 2006, to save up a few bucks for the inevitable downturn (i.e. now)? I don't think the Canadian public would have bought into it - cutting government spending at times of record economic performance and surpluses?

    The Canadian public also won't like the government from spending or reducing taxes into deficit financing - explains the latest non-reaction to the last GST cut (compared to the strong anti-reaction of implementing it!).

    Fortunately I don't think (yet) we'll screw up the country fiscally like Trudeau and Mulroney and like Bush and congress did for the states. At least we haven't resorted to giving $300 cheques to people (yet).

    But on your initial post, Flaherty certainly needs to brush up on Keynesian economics...

    By Blogger Sacha, at 9:58 PM  

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