Oil dipped below $30 a barrel yesterday. And the loonie is headed south of 70 cents. But, Alan Freeman writes, it's not the Apocalypse:
If the federal government is forced to run deficits in the range of $20 billion (rather than the promised $10 billion) over the next few years, those deficits will be manageable — and nobody outside the Tory caucus and a few right-wing op-ed pages will complain. As Flaherty discovered in 2009, Canadians don’t care much about the size of the federal deficit when they feel their jobs and personal finances are at risk.
As for the new government’s rookie budget, Morneau — and Canadians — should try not to panic. This isn’t 2008, when we were facing the very real threat of the global financial system collapsing entirely. This is just an old-fashioned economic downturn — even if it will be quite painful for some in the short term.
Stephen Harper inherited the best debt to GDP ratio among the G7 countries. Canada still boasts the lowest debt to GDP ratio among the seven countries. The markets will not go crazy if Canada runs deficits for awhile.
The problem is how that deficit money should be spent:
Infrastructure spending is a great idea — but unless the federal government throws money at poorly conceived make-work projects (the sort of thing I like to call “paving the snow”) it can’t possibly get $5 billion out the door in time for the summer 2016 construction season. Short-term spending — money for summer student jobs or speeding up construction projects already underway — might be a smarter form of instant stimulus. The new infrastructure program can wait a year.
One thing that could help would be for the Trudeau government to stop Conservative-mandated government austerity in its tracks — by reversing the mindless cuts to veterans services and First Nations. The government also should halt the Harper-era practice of budgeting billions of dollars in spending and purposely allowing much of the money to lapse, unspent, before returning it to the treasury.
The federal government’s lapsed spending hit $8.7 billion in 2014-15 — an underhanded way of cutting the budgets for Veterans Affairs, International Development and National Defence, for example. Reinstating that money would allow it to flow quickly into the economy.
Spending money isn't the problem. It's all about how the money should be spent.