As soon a Bill Morneau announced that the federal deficit this year would be at least $18.2 billion, the howling began. "Batten down the hatches," John Ivison warned, "Liberals are full speed ahead toward a sea of red ink." And Tasha Kheiriddin wailed, "Almost $20 billion in the red an it isn't even March." Rona Ambrose claimed her party bequeathed a balanced budget to the country before it was thrown out of office. She forgot to mention that her party's budget was predicated on $65 oil -- which is now $30 a barrel.
Amid all the sound and fury, Dylan Marando writes that citizens and politicians alike should not lose sight of how that $18 billion+ should be spent:
Unfortunately, what’s missing from the current discourse is a call for a broader trickle-up approach to stimulus, whereby the economic engines of recovery are not just bridges or international accords but also the typically overlooked purchasing power of low-income Canadians.
To be clear, this isn’t a plea to move low-wage workers up the skills ladder. Nor is this a call for job creation. The claim being made here is far simpler: If you put more money directly in the pockets of people in low-income households, they’ll buy more, and the economy will benefit.
Consumer spending makes up more than half of Canada’s GDP. Increasing the purchasing power of Canadians is essential for long-term economic stability. Yet 4.6 million Canadians live on low incomes. Inequality is rising. We are failing in our effort to maximize the number of active participants in our economy.
Mounting evidence demonstrates that measures like an increased minimum wage can be an effective means of boosting aggregate commercial activity, even when we take into account the potential negative effects on business investment.
We have spent three decades shovelling money into the hands of the wealthy, who -- despite the rhetoric -- tend to sit on what they have:
The logic behind these effects is straightforward. Low-income households, when given increased financial capacity, are more likely to spend. Unlike the many Scrooge McDucks in the corporate sector, they don’t sit on piles of “dead money”. They don’t withhold demand.
And, by the way, these are not new ideas. They've been around since the Great Depression. But we also learned from that debacle that the way deficits are used makes all the difference.
