Categories: Andrew Coyne, Capital Read

This government sucks. Unless it blows…

by Andrew Coyne on Monday, November 24, 2008 4:08pm - 72 Comments

Went to hear Paul Martin speak at the Canadian Club today. He was impassioned, articulate, and compulsively boastful, as all former politicians are — an endless recitation of his many achievements and visionary ways, all the good works he was performing before, you know…

On one point I sort of agreed with him, though: the present government cannot escape blame for the coming deficit, having raised spending at such a reckless pace since it came to office. (I would not be so churlish as to point out that spending rose even faster in the last years of the Martin government.) Still, I am stuck on one point: Martin also said he favoured running a deficit, as a means of “stimulating” the economy in this time of worldwide economic crisis.

I wanted to ask him, but didn’t: So if you were prime minister today, would you run a deficit or not? If not, then what becomes of any putative Keynesian stimulus? If so, then what’s your beef with Harper? If deficits are what’s on order, that’s what he’s fixing to deliver.

It’s one thing for green-eyeshade types like me to grump about the Harper spending record, since I don’t actually think deficits stimulate anything, except a lot of hurried, ill-thought-out “infrastructure” schemes: the bureaucrats have already been given their marching orders by the current Finance minister, namely to “get the money out the door.”

But it makes no earthly sense to be attacking the govenment for running a deficit in one breath, and calling on it to do so with the next.

CONTRARIWISE: Mind you, this sort of incoherence is rampant these days. The problem is that consumers have been spending too much — unless it’s that they’re saving too much. Banks lent far too freely, but under no circumstances should they lend less. The United States has been living beyond its means for far too long. So we’ll pitch the US government headlong into trillion dollar deficits in the name of stimulating more consumer spending, much of which will go to suck in imports. I guess this is that “pragmatism” we’ve been hearing so much about…

Tags: deficits, financial crisis, Paul Martin, utter incoherence

More by Andrew Coyne

Andrew

“Furthermore to take any of the rhetoric on here seriously, one would have to argue that Canada and the rest of the western world has incompetent governments.

The fact that people think a politician can simply snap their fingers and make all their problems go away is ridiculous.”

I think the incompetence enters in where they failed utterly to avert this disaster and indeed made many regulatory changes to make it more rather than less likely.
BDJ

“Just about all of that is attributable to the prudence of previous Liberal governments. If we had 15 years of CPC governance, I’m sure we’d be in a much less enviable position.”

Awe yes, I’m sure the increased economic activity in Canada had nothing to do with NAFTA, which was opposed by the Liberals in 88. Good one sir.

“The Liberals have been proposing for several election to lower corporate tax rates. This past election, they promised steeper corporate tax reductions than the Conservatives.”

Which would pan out like their promise to cut the GST in 1993. Liberals are known to be expedient with values when it comes to actual governance.

Much like the tax cuts in 2000 which were timed right before an election.

“To attract investment in Canada, you don’t have to encourage Canadians to invest, you have to make Canada appealing for investment (ie, mostly foreign). ”

I believe the Conservatives just opened free trade with Columbia, and are working on a free trade deal with Europe. However since you’re a hyper partisan Liberal, I’m sure you’re opposed to that as well.

“I’m guessing most of those who have a hate-on for carbon taxes are dependent on the unabated development of the tar sands.”

Yes, because shutting down Alberta’s economy and creating a stronger separatist movement is a great thing for the country. Unfortunately those of us in Alberta don’t really like quasi-socialist redistribution schemes.

“If that is the case, I rather doubt your motives are driven by anything other than self-interest.”

Yes, it’s all a conspiracy. Apparently I got help from the same cabal that committed 9/11.

But it’s always gratifying to note that if someone disagrees with a Liberal plank they are automatically driven by self-interest. Which isn’t necessarily a bad thing considering all of the collectivist junk I here coming from the left.

As well I love how Liberals like yourself assume that Canada would have a magical barrier up to ensure that a GLOBAL economic downturn would never effect Canada for some inane reason.
Andrew

“Awe yes, I’m sure the increased economic activity in Canada had nothing to do with NAFTA, which was opposed by the Liberals in 88. Good one sir.”

I don’t think you can say the growth could be attributed to NAFTA, or at least not as a truism. The recovery in the 90s was due to increased US demand and much more advantageous currency exchange rates. It’s not at all clear what effect NAFTA had. Nonetheless, neither the PCs nor the LPC can take credit for US demand or, for the most part, exchange rates (domain of BoC).

“Which would pan out like their promise to cut the GST in 1993. Liberals are known to be expedient with values when it comes to actual governance.

Much like the tax cuts in 2000 which were timed right before an election.”

Harper has broken a huge promise not 50 days after he made it WRT deficit financing, which he categorically claimed he would never, under any circumstances, ever condone. He made a seemingly earnest and sincere pledge to the Canadian people to not run a deficit.

The Liberals have a track record of reducing taxation within the constraints of fiscal prudence. Yes it is politically motivated, just as Harper’s promise to cut our least harmful, but at least the Liberal cuts made some kind of sense aside from political motivations.

“Yes, because shutting down Alberta’s economy and creating a stronger separatist movement is a great thing for the country. Unfortunately those of us in Alberta don’t really like quasi-socialist redistribution schemes.”

Ah, yes. Socialism. You been getting Palin’s talking points.

AFAIK, nothing requires emitting carbon to extract and process oil from the tar sands. Isn’t there a scheme to use a nuclear reactor instead? Even still, I doubt a few dollars per barrel would devastate the Alberta economy, especially when counteracted by significant reductions in CIT. If that is enough to shut down the Alberta economy, it is a house of cards which will be utterly annihilated by this recent decline in oil prices. Hope you have an exit strategy.

“Yes, it’s all a conspiracy.”

I didn’t mention a conspiracy. I’m guessing you’re someone who just wants the government to tax everyone else. That would fit your arguments better than ‘free market crusader’.

“As well I love how Liberals like yourself assume that Canada would have a magical barrier up to ensure that a GLOBAL economic downturn would never effect Canada for some inane reason.”

Rather the opposite. Harper reduced his capacity to deal with any kind of recession or economic downturn. This is highly imprudent as we all know how vulnerable we are to changes in the international economy through trade. Which is all the more reason to question the wisdom of trying to stimulate the Canadian economy through domestic consumption. Much of that consumption will leak out to foreign manufacturers (esp Chinese and American) through imported consumer and durable goods. Cuts in taxes on investment would be far more logical, or at least investment in infrastructure. Start paving roads, fixing sewers, and upgrading transit with gusto. More consumer debt is not the road out of our current difficulties.
BDJ

“I didn’t mention a conspiracy. I’m guessing you’re someone who just wants the government to tax everyone else. That would fit your arguments better than ‘free market crusader’.”

No, as I stated before free marketeers don’t believe bureaucrats should be able to regulate and tax businesses to death. Unlike yourself.

Any person who states they support the free market by putting in an extra mile of redtape like yourself is delusional.

However your opposition to free trade is giving you alot of credence here. Especially when you state the reason why our economy did so well in the 90′s wasn’t due to the central planners in Ottawa but due to the US economy.

“Harper has broken a huge promise not 50 days after he made it WRT deficit financing, which he categorically claimed he would never, under any circumstances, ever condone. He made a seemingly earnest and sincere pledge to the Canadian people to not run a deficit.”

Oh I agree, however the difference is that with Harper he will take us into a deficit by putting more money into our military, law enforcement, and the CBSA. The Liberals on the other hand would put us into deficit by putting more financing to crappy artists and subsidies to half-baked regional development programs.
BDJ

That being said, I’m glad you recognize that the economy isn’t contingent on what a few old white men do in Ottawa, and soley what they do. Apparently when Bob Rae gets hit with a recession he’s a victim of the times, but if it happens to a Conservative it’s incompetence. A rather stupid claim considering the fact that we’re doing better than all other western nations.
Aidan

BDJ – Didn’t the Conservative Economic Action Plan To Try To Find Their Economic Arses With Both Hands just create a new regional development program and hike the budgets of those that already exist?
BDJ

I’ve never stated the CPC is perfect, they’re simply the lesser of two evils. That being said those who think the Liberals are economic super geniuses due to extra revenue from the GST and free trade, both Tory creations.
Andrew

“No, as I stated before free marketeers don’t believe bureaucrats should be able to regulate and tax businesses to death. Unlike yourself.”

I like how you added that last bit. You don’t really know anything about my predilection for regulation. I rather oppose Harper’s costly new cap and trade regulations, for instance. A carbon tax with offsetting tax reductions would be a much more effective and efficient incentive scheme.

“However your opposition to free trade is giving you alot of credence here. Especially when you state the reason why our economy did so well in the 90’s wasn’t due to the central planners in Ottawa but due to the US economy.”

Opposition to free trade? I am quite in favour of it, and always have been. Just because I questioned the effect of NAFTA does not mean I am opposed to it. Although, I am opposed to NAFTA as it does not make trade free enough, leaving quite a few barriers.

“Especially when you state the reason why our economy did so well in the 90’s wasn’t due to the central planners in Ottawa but due to the US economy.”

Huh? I oppose free trade AND think that trade is what helped our economy recover?

“Oh I agree, however the difference is that with Harper he will take us into a deficit by putting more money into our military, law enforcement, and the CBSA. The Liberals on the other hand would put us into deficit by putting more financing to crappy artists and subsidies to half-baked regional development programs.”

Law enforcement is often good money after bad. I’d rather see highways, sewers, water treatment, hospitals, schools, electrical generating capacity, etc.

Also, Harper seriously cut back on military spending prior to the election call, including the cancelling of the icebreakers we had planned to order. I thought that was an odd choice, since that is most related to our national sovereignty (moreso than heavylift aircraft, etc.)

Do keep in mind that most military hardware is made elsewhere, so spending on those items won’t help the Canadian economy much.

I don’t recall any regional development programs proposed by the Libs. Also, one Harper backtracked on arts funding, I don’t think there is much daylight between them.

Face it, the CPC are out-Liberalling the LPC. I know it must be eating away at you.
http://andrewcoyne.com Andrew Coyne

Just a thought, Andrew, and I mean no offence, but could you pick a different handle, so people don’t think you’re me?
http://www.truemuse.wordpress.com truemuse

You have green eyes? Dreamy…

I agree that more government spending is not the answer. A few protectionist hand-outs, such as the auto industry and banks are needed, not because these industries deserve them, but for other factors. On the one hand, all the nations are crying out to refrain from protectionism. On the other, it is clear that prices and valuations in world markets are hard to reconcile with national economies. I worry that cries to spend less will take the spin out of social problems that can only be solved with government money, solving which the workforce will finally become more inclusive of all and more productive. That is the vicous cycle to break. If the auto makers get some help, I am glad communities in Canada won’t be furthered degraded. I understand that the average Canadian with a family has seen a rise in the price of food and of education (for the hours when schools are closed) that is very hard to bear. Transportation costs are significantly higher for everyone. Canadian are least satisfied with their jobs and this is the biggest draw on productivity. Each system, whether it be law, education, medicine, skilled labour, or knowledge worker, has individual members whose individual contributions and success need assistance in order to turn this crisis around. That sounds like a tall order, but in fact it’s not. Thinking about the problem in this way would be a good way to set priorities.
http://www.truemuse.wordpress.com truemuse

That approach would require strong federalism. For instance, beginning with a survey of job dissatisfaction among lawyers, you would find those in the family law speciality being the most stressed out dealing with so many social issues and provincial red tape and those in corporate law making the most money for the least benefit to society and think of ways to balance these different areas of law so that there is not such disparity between lawyers and between the value of the products of their work.
Jack Mitchell

Wait, Andrew Coyne is not the same as Andrew? Whoa. So much for my Jekyll and Hyde theory.
http://www.truemuse.wordpress.com truemuse

and I think that’s not socialism or communism, is it? We have hate crime laws, human rights tribunals and the Charter of Rights and Freedoms is a law that can bind all our laws, provincial or federal. So we are ‘there’ already, in a system that seeks to fundamentally change the roles and responsibilities of citizens, one to another. I’m not aware of any system that has made an evolution of this nature. Daily, we are confronted with a need to change, to be better, yet thwarted by the obstacles to doing it. For instance, on this Sec. 13 debacle, the media (who feel some suffering at the hands of HRC’s) can cry loud, but the fundamental change to society has already been made. It’s accomplished. An attack on the HRC’s is misguided because our courts are not exactly bastions of protection for free speech. The media feel cornered, that the very thing they do is at stake. Well everyone feels that way!

This interesting recent ruling shows that courts are willing to intervene in private organizations such that they abide by their own rules and by natural justice. This, to me, is a very responsible attitude of the court. So many important boards work to represent Canadians at work and toward social justice: The CMA, LSUC, the CRTC and so forth. Each one of these can be held accountable by the courts for a standard of democratic decision making. Yet each individual in society must find a way to contribute, and with such a need to hear the suggestions and hear the problems from Canadians, surely HRC’s don’t need to be abandoned even if a few notables suffer. HRC’s can help an individual understand whether his complaint is valid, without necessitating court action. HRC’s don’t get enough government support as it is when they make findings that might cause governments to have to spend or change their ways. They are the underdogs — to portray them as the evil empire is just wrong. What will happen eventually, is that Associations who maintain memberships will have to clearly register and advertise who they represent and how and why. This will be the result of many hate speech inquiries. That would be a good thing.
http://CBC Bert

Hey,
I was able to buy my loaf of 5 day old bread and my can of spam today and I am dam happy. So poo on your GST.
whatever

Gosh Andrew you really cleared up a lot of questions for me. Here I was thinking that the reason Harper broke his own edict by calling the election early was because he wanted to get it over with before the stuff hit the fan and his astute elimination of the federal surplus left no choice but to run a deficit. Martin sure doesn’t get it – if he hadn’t created the surplus in the first place, then Harper wouldn’t have had to pull out all the stops to get it spent before the global economy tanked. Sure am glad the country has brilliant minds like yours to turn to when economic events need explaining.
tornpocket

Nothing like a fried Spam sandwich!
Alan

Nice to see all of the economically/fiscally challenged lefties show up.

Giving a government like a surplus is like giving an alcoholic free reign at a stocked bar. The party will be great, but the hangover will go on forever. As far as I am concerned, a government should only tax enough to deliver its services, and return the surplus back to the taxpayer, who owns the money in the first place.

I’m not worried about a potential recession, but I am concerned that everyone wants the government to act now in a way that history shows is economically wrong; the only result will be to screw things up for the future. Running a deficit is like raiding your kid’s savings account to pay for your drug habit today – selfish and destructive to all involved.
Aidan

The surpluses have been going to paying the national debt. I heard a figure recently that we have put down nearly $100 billion since the surpluses started – that is a huge savings on interest. We are not in a position to “give back” or do anything else with a surplus until we have that old debt cleared up. Too bad the stoopid GST cut has made sure that will take longer than anticipated.

To be clear, I think this idea of “government should only collect what it requires to deliver services” as being sound economic policy is a bit spurious. I’d like to see a contingency fund developed when times are good (or when we are profiting on one-time sales, like national assets or non-renewable resources) to see us through the cyclical rough patches. That way we do not resort to smashing the next generation’s piggybank with deficits, or as my boomer parents’ generation did, take a bunch of bad loans out in their kids’ names.
Wayne

I think Alan has said it best. I think the very last thing that we need right now is knee jerk reaction as the oppostion parties apparently wnat and to borrow money for the gov’t to spend as ‘ Stimulus ‘ . After all as of now we are in surplus and our unemployment numbers are still at record low levels so what’s the hurry I say wait until the next budget and if there is a deficit in the future deal with it then. I like what I hear about bringing the budget for next year in earlier I think that would be very appropriate. This idea of driving oursleves deliberately into a deficit right now with a stimulus package is absurd and more than like why the opposition parties are asking for it after all they have that luxury of scoring political points against the gov’t at this time.
Andrew (not Potter or Coyne)

Wayne: the main way I think a stimulus package would be appropriate would be for government to fund and expedite all (or almost all) proposed infrastructure projects on the books. This would help to take up slack in construction, materials, design, etc. industries.

Also, any money spent now is likely money that won’t need to be spent in the future (pulling capital expenditures forward in time). I don’t think stimulating consumer spending is really all that fruitful an avenue to pursue as consumers are nervous. A permanent cut in GST does nothing to make people spend money sooner. A GST holiday would, however, stimulate consumer spending. Still, consumers are skittish about their net wealth, and are likely to save any windfalls they receive in the near future.
Ed B

A balanced budget is one where revenue = expenditure. A surplus is not a balanced budget, it is overtaxation. The dangers of surpluses (surpli ?) is that they are a temptation to politicians to go spend anyway. If Martin hadn’t left such a big one, Harper wouldn’t have gone out and committed half of it to “programs”.

In my opinion, there should have been a budget line item called “Debt reduction”, budgeted at equal to the amount of the expected erstwhile surplus, committed to, and “spent” accordingly. Either that, or stop overtaxing us. A deficit is just a surplus with a negative sign.
http://ragingranter.blogspot.com Raging Ranter

This government sucks, unless it blows…

However, I, Paul Martin, the Merciful, the Beneficent, can suck AND blow at the same time.