Not Drinking the Stimulus Kool Aid

January 23rd, 2009

I have been puzzled by what to say about the reported $35B budget deficit for next year. Flabbergasted begins to explain my reaction, but the larger question is, what was the point of saving the government from the coalition of the economorons? So the Conservatives could outspend them? Harper should have let the opposition take ownership of this kind of deficit, and fought them on it when they cannibalized themselves.

Today, Stephen Harper is queried by Sun Media. Believe it or not he calls this a majority government budget except for, “a couple of things where we’re making concessions to the opposition we wouldn’t normally make…”

Seriously Stephen Harper, economist, you would create a $35B deficit with a majority? Finally we have found that mysterious hidden agenda.

Meanwhile John McCallum was earlier this week blaming the Tories for the upcoming budget deficit because they increased spending and cut taxes in the past couple of years. But hold on, the Liberals are demanding stimulus. Threatened to topple the government because there wasn’t enough stimulus in the fall update. In fact, John McCallum said this recently:

Finally, this government is talking about a real stimulus, which is what other countries have been doing for months.

(And what have other governments been doing John McCallum? In Britain, they cut the VAT, their version of the GST. Is that the tax cut Prime Minister Harper shouldn’t have made? Like the “other countries have been doing…”?)

But, if spending and tax cuts provided stimulus, and the Tories have been spending and cutting taxes, how did we get into a recession. The reason is simple: all that spending doesn’t really provide stimulus, and tax cuts provide some, but minimal. When government spends money, it must first take it out of the economy, there is no stimulus, just money moving from one area of the economy to another, usually from productive to non-productive.

As for the idea of building roads. There are only so many machines capable of building them, so many people capable of operating what machines there are. If you start throwing money into road building what you end up with is not more people working, more roads built, but more expensive roads and the people who work on them making more money.

So Prime Minister Harper, save us the nonsense about stimulus. Let the government fall, let John McCallum tender a $35B deficit budget, and fight them hard when their coalition eventually falls.

pimply minions of bureaucracy, Politicians acting badly, Pompous Igghead, Silly Liberals

  1. bec
    January 23rd, 2009 at 22:25 | #1

    I am not drinking the koolaid either but I do see significant differences between this downturn and the other 2 that I remember.
    The interest rate.
    I can see the logic in the conservatives negotiating through this, versus a socialist agenda. That is my steam, to stay astute and on board.

    As troubling as it seems, I know this guy will play this out properly and we need to support our team, versus the alternative….chaos.

  2. January 24th, 2009 at 00:07 | #2

    For some reason the heading on the BT site read Stimulous Cool Aide…

    I was hoping to hear about a Greek soft drink brand or something.

    But you are of course correct that the whole concept of a government spending money that was sucked out of the economy to rescue the economy and thus creating the need to eventually suck still more money out of the economy is somehow flawed.

    The allegory of finding one self in a hole while digging a hole is apt.
    First stop digging.

    The economic hole dug by governments is the TAX hole … the shovelhead is public spending and the handle the tax system.

    Stop shoveling.

  3. aa
    January 24th, 2009 at 10:00 | #3

    Tories talk about balanced budgets but can’t deliver. We are going back the the Mulroney insanity of annual deficits in the tens of billions of dollars. Not to worry. There will be Liberals to clean up the Tory mess and restore sound finacial planning and eliminate deficits.

  4. January 24th, 2009 at 10:27 | #4

    Ahh, the great myth of the Mulroney deficits. They were Trudeau deficits, and Mulroney’s government got them under control. In fact all but debt service charge was deficit free by the end of Mulroney. Once interest rates came down, the Cretienites could take the credit.

    So, which Liberal will clean up the mess? John McCallum who, in this article I point out, last weeks said:

    “Finally, this government is talking about a real stimulus”

    That’s the Liberal finance critic saying, finally they are spending enough.

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