Categories: All Business

I got your stimulus right here

In today’s Financial Post, Jackie Thorpe provides some much-needed perspective on the current debate…

by Steve Maich on Monday, December 1, 2008 9:55am - 10 Comments

In today’s Financial Post, Jackie Thorpe provides some much-needed perspective on the current debate in Ottawa over the Conservatives’ fiscal update, and specifically the need for a stimulus package to save the economy.

To anybody tempted to accuse the Tories of being do-nothing malingerers on the economic file, she presents chapter and verse on billions in planned tax cuts, a planned surge in infrastructure spending, and a $75 billion credit lifeline to ensure the banks can keep lending. The bottom line: there’s already plenty of stimulus in the pipeline. Now, everybody shut up and let it work.

JT makes a pretty persuasive case. I still maintain the CPC has been pretty awful at communicating a coherent message on the economy. I’d also argue that the move to cut off funding to the parties (though a sound idea in principle) just ended up looking incredibly petty and opportunistic. Their various climb-downs now make them look weak rather than collaborative. Nevertheless – this whole controversy is supposed to centre on the question of whether Ottawa is doing enough to support the economy. And on closer inspection it would seem that they probably are. It’s easy to run around and say “we need stimulus!” But it’s much harder to articulate exactly what we need that we haven’t already got coming.

Tags: credit, economy, fiscal update, stimulus package

More by Steve Maich

http://carnewsandviews.com jwl

“It’s easy to run around and say “we need stimulus!” But it’s much harder to articulate exactly what we need that we haven’t already got coming.”

Too right it is. I agree that Cons are dire in presenting their arguments. The Cons seem to be relying on people remembering obscure policies in the last one or two budgets which is moronic. They need to be on tv, radio, print and explaining what they are doing. I wrote last week that Harper/Cons need to use some of their money and get 15 minutes of tv time in the evening and in plain language spell out they have done so far, what they are planning for the future and don’t even mention the oppo parties.
Stephen

Yes and now the Bloc Demirals is saying an additional $30 Billion, or an addiional 2% is to be provided.

If Jack is to be believed the corporate tax cuts, which the Liberals said was a good idea as well, will be reimposed. So how that is new money is beyond me, its redirected money.

But thanks for the link, and yes the general press are falling for the line….oh and just to add a little cognative Dissonance with your morning bagel the economy grew at 1.3%….so this is the unprecedented recession?

My suspicion is that the government does the perogie and comes back in jan so they can solve the communication problem and present their budget. Whether they will try and top it up further or differently is another question. But agreed the communications job has been horrendous, but who knew they had to accelerate their budget plans.
Chris B

I think, like in many matters economic, this is a crisis of confidence. Hence, the government needs to do something even though, really, they do not need to do much. After all when you have the Euopean countries and the US and Japan and China all going for massive stimulus packages, Canada has to join in, so that we can reassure eveyone that things will be okay.

Let us just make sure that we build things that we need (like, say, replacing the lead pipes in our cities) rather than the things we don’t (like, say, Mirabel airport)
Colin Campbell

I’m with Chris B. The current insentives do nothing to help assure people that their savings and jobs will be safe. As Roy MacGregor notes in his column today, the Conservatives seem badly out of touch on this point. If most people don’t feel that there’s enough stimulus in the pipeline, then there isn’t. The Conservatives haven’t inspired much confidence with their offerings at a time they badly need to.
Andrew (not Potter or Coyne)

I agree as well. The stimulus isn’t really enough. There has to be the perception of stimulus to change expectations about future inflation. The whole point of this is to avoid deflation, and quiet stimulus is counterproductive. Shout it from the rooftops!
Geiseric the Lame

“Much of the new stimulus over the next few years will come from cuts to corporate income taxes, which are set to drop to 15% by 2012, the lowest in the Group of Seven and a dramatic decline from the 22.12% rate that was in place in 2007.”

shill a litlle louder
Andrew (not Potter or Coyne)

Oh, it’s worth noting as well that we have committed ourselves to 2% GDP incremental stimulus (G20 Peru). I don’t think reneging on that would be particularly well advised.
Emma

Take a look at last year’s budget — a lot of the coming “stimulus” is gradual and back-end loaded. It’s not going to happen in time to stimulate a slowing economy. Corporate income tax rates, for example, went from 22.1% in 2007 to 21% in 2008, and I think they go down by a similar amount in 2009. I’m not sure that’s a big enough reduction to act as a short- to medium-term stimulus to the economy, particularly given the number of companies that end up paying no income tax due to tax losses.

Buying mortgages from the banks would only act as stimulus if a simultaneous agreement was put into place requiring banks to lend out a commensurate amount. As far as I know banks have been left to their own devices as to what to do with the additional liquidity.
whyshouldIsellyourwheat

I agree the the kConservatives have…er…HAD a story to tell, but they chose to tell a different story.

Their messaging has been an appeal to their ideological base all along, rather than tailoring their message the the broad moderate apolitical middle of the political spectrum.

They opened the door to the middle class to the Opposition through their own incompetence.
Stephen

McGregor’s column has a point, but only to a point. Maybe we had better start using words like crisis in a more measured manner, can there be more crisis, this is more crisisier than before?

Point: There was a trust crisis within th banking sector, this was caused by questions of solvency. The money firehosed into the system seems to have contained this and the fire contiues but is now on a more recognizable path.

Not surprisingly this affected consumer confidence. But to fix consumer confidence properly people need real growth and believe that this growth will come. People havent stopped buying, they have trimmed purchases, many would say rationally since wasnt the problem before overconsumption fuelled by debt?

These things take some time and we have seen them before. So I dont think I buy Mcgregor’s thesis that we havent done enough because peole “feel” we havent done enough. It isnt just a confidence game, all mirrors and pretend. Consumers need time to “observe” what has happened and what may happen. They get some of this from headlines, but they also see this in their own family budgets, bank balances and RRSP statements. These are the hard facts families base spending decisions on.

McGregers sentiment leads to overshooting…..significantly. We have been there before, lets not do it again.