Federal Budget 2009, aka Thank God for the Coalition, aka The Future Can Take Care of Itself, thank you very much

Previous Federal Budget Posts:
2008
2007
2006
2005: part 1, part 2, part 3 (I was keen, back in the day)

So, the budget.

1) First of all, for anyone who voted Conservative and feels betrayed by this 'betrayal' of conservative values, let me make clear the distinction between 'Fiscal Conservative' and 'Right Wing Government'.

Fiscal conservatism means not spending more than your income as well as paying down your debts while times are good.

Recent right wing government leaders have included George Bush Jr., George Bush Sr., Ronald Reagan, Mike Harris, Gordon Campbell, Brian Mulroney and Stephen Harper. Some of these people inherited deficits, some inherited surpluses, some governed through good times, some governed through bad times - they ALL ran budget deficits. Right wing government is all about cutting taxes, which is not fiscal conservatism, in fact it means reducing your income which is the opposite of fiscal conservatism

Ever since taking power a few years back, Harper and co. have been cutting taxes and increasing spending. While it's true that the economic downturn is hard on the government's finances, as pointed out at Accidental Deliberations, the forecasted deficit for the next 5 years of $85B is less than the combined total of the cost to the treasury of the gst cut + the tax measures in today's budget over the same time period.

People who refuse to adjust their preconceived notions that people on the right are responsible stewards with firm hands on the tiller while people on the left are starry eyed hippies who are still trying to get their head around the concept of a 'budget' are clearly slow learners, so let me help:

Right wing governments are not fiscally conservative
Right wing governments are not fiscally conservative
Right wing governments are not fiscally conservative
Right wing governments are not fiscally conservative
Right wing governments are not fiscally conservative
Right wing governments are not fiscally conservative
Right wing governments are not fiscally conservative

Got it?


2) Overall, this could have been a lot worse, hence the post title, 'thank god for the coalition' which scared the Harperites into acting at least somewhat reasonably with respect to the country's finances. As pogge notes, they'll likely go back to their childish ways once the budget is passed, but the budget is important, so my thanks to Layton, Duceppe and Dion for saving us from a plan along the lines of the disastrous Fall Update. Most of the spending measures are temporary, at least a few of them seem like good ideas and there's nothing here that's truly awful, so by my low expectations, I'd call it a relief.

3) Alas, this leads me to the great flaw in the budget which is: Climate Change, Peak Oil? Hello?

This would be a great time to start making the necessary investments to allow Canada to reduce its contribution to climate change, and thrive in a world running short on cheap oil. But there's very very little in this budget to address any of this. A huge opportunity missed, and one we're likely to regret in the future.

4) What's up with the up to $1.35B in government subsidies for people renovating their homes? Could someone from the government please explain to me why, because there is an economic downturn it means that I, as a non home-owner, should be subsidizing the granite countertops and expanded decks of my neighbours? I think I know more arguments for government intervention in the economy than most people, but I suspect that has got to be a new one. Stuff like this really suggests the Cons have no idea what they are doing or even what government is for.

It's as if they said, 'you want us to spend? fine we'll spend' and just started randomly coming up with ideas without any consideration for where government spending is appropriate or what future needs the country has.

Saying that reminds me that they did lay out 3 priorities for spending, of which #2 was

"Targeted. Measures that target Canadian businesses and families most in need will trigger the largest increase in Canadian jobs and output."

So as compared to people who don't own a house, it is homeowners who are 'most in need' and need to be targetted?

CalgaryGrit puts it well, "I can't help but think that the lack of focus stems from this government's refusal to recognize the problems we were facing until a month ago, and their refusal to accept that government can actually be a force of good in shaping the future of a country."

5) The Cons have now responded to some of the strongest economic conditions ever seen by cutting taxes, and to some of the weakest economic conditions we've seen by cutting taxes. Next time some right winger is arguing we need to cut taxes because the economy is strong/weak, tell them to stow it. While I'm on the topic, we'll need to raise taxes one of these days to put the government's finances back in order.

6) Memo to the Conservative government, we just had a housing bubble (you helped make it worse, remember?), government subsidies to build *more* housing is not a priority right now! In fact, it's the last thing we need.

7) As of this budget, the government will now be providing low interest loans totaling $125 billion to the financial sector (what the government refers to as 'purchases of insured mortgages' is in fact very low interest loans to the banks). But when they provide $4 billion in loans to the Auto sector at higher rates, "we are doing this with the knowledge that the automakers must change the way they're doing business in a very serious way and must bring their products on their costs into line with the market place."

8) As Mike notes it looks like Conservatives will have to now agree that Bob Rae was right all along. After all, if you look at the chart on page 58, it suggests that we should expect a recession that is nowhere near as bad as the one from the early 90's, and yet here the Conservatives are running a massive deficit. This chart also leads me to think that...

9) People, including the ones who wrote the budget, are still in deep denial about what is coming.

10) Does anyone know if there's any way to tell if the government will finance this deficit through borrowing or through printing money? I'd feel a lot more happy about this if they were going to print money. Right now we've got way too much debt in our economy and having government borrow to replace collapsing private borrowing won't help the overall situation. To get rid of the debt will either require destruction of our (credit) money supply likely leading to damaging deflation or printing money so that the money supply can stay stable while the debt collapses.

11) Most of the infrastructure spending depends on funds being matched by other levels of government. I can't speak for other municipal governments but Vancouver is already being stretched pretty thin by the economic downturn and has nowhere near the federal capacity to either borrow or print money. Thanks for nothing.

12) The chart on page 46 on the 'evolution' of private sector forecasts for economic growth is amusing. I always thought that forecasts were supposed to be a leading indicator, not a lagging one!

13) Unlucky number thirteen. I said it before, but it's worth repeating: wind energy? hydro? transmission? smart meters? the future? Apparently not, after all, who can afford to fight climate change or prepare for peak oil when there are granite countertops to be installed.

It would be nice to have a government that would be actively taking on the important issues facing the country (see Obama, Barack), not one where you just feel relieved that their budget is a mess and a waste rather than being a disaster.



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The folks at Relentlessly Progressive Economics have a pretty good, relentless summary of the budget here.