Tuesday, June 02, 2009

Things I'm not angry about

The size of our federal deficit.  In a recession, a deficit is normal and even healthy.  And while the deficit is large in absolute terms, in proportion to GDP it's not even close.  A $50 billion deficit is roughly 3.5% of our GDP, which was the kind of accomplishment that Martin and Chretien celebrated when they managed to bring federal spending that low. It may not be a great long-term position, but nobody thinks that's what this is -- when employment and GDP growth pick up again, the deficit will shrink naturally.

Similarly, in terms of % of GDP Canada's deficit isn't that far from Ontario's current deficit:  According to the headlines today, Ontario will run an $18 billion deficit this year.  Ontario being 40% of Canada's GDP, that works out to the equivalent of running... a $45 billion deficit nation-wide.  Liberals who are unconcerned about Ontario's deficit don't have much ground to criticize Harper.  And Conservatives who aren't concerned about Canada's deficit have absolutely no basis to criticize McGuinty.

Now, the size of the deficit isn't the only thing that matters -- it's how we got here, and how we get out that matters more. Here, I'm in the "pox on both your houses" camp. Both McGuinty and Harper have given too much away in tax breaks, though Harper has been more egregious on this count. And looting the commonweal, as Harper proposes to do, is the worst form of false economy: coming out of a recession we'll be left with fewer tools at our disposal to build the sustainable economy we need.

I'll also state that neither Ontario nor Canada have covered themselves in glory, given that large chunks of this deficit are the direct result of the decision to throw piles of money at the auto sector, in the vain hope that an industry that's shed tens of thousands of jobs over the years will continue to shed jobs at a slightly slower pace.

All that said, McGuinty at the very least is spending money -- and crucially, encouraging others to spend money in a big way -- on new green energy projects, which have a better chance of bringing us out of this slump than most other sectors.

1 comment:

Mark said...

What makes me mad is that this was pretty deliberate on Harper's part, and Iggy knew that this is what Harper was doing, but the Libs still let the Cons get away with it.

Any day now, we're going to get the old "We have no choice but to slash government programs" canard from Harper and Flaherty. The Libs will make some noises, but when it comes time to vote, they'll vote with the Cons on that too.