News flash: no free lunch after all

Fraser Institute study confirms what was already plain as day: fiscal “stimulus” had nothing to do with the recovery. Using Statistics Canada data, they find:

Of the 1.1 percentage point improvement in economic growth between the second and third quarter, government consumption and government investment each contributed only 0.1 percentage points. Business investment contributed 0.8 percentage points and was the driving force behind the improvement in economic growth.

Of the 1.0 percentage point improvement in economic growth between the third and fourth quarter, government consumption and government investment contributed nothing. Over this period, increased net exports were the primary reason for the improvement in economic growth.

This, as I say, was obvious enough already. The recovery began at the end of Q2, long before any shovels hit the ground. Fiscal stimulus, besides ineffective, was unnecessary: the extraordinary infusion of monetary stimulus by the Bank of Canada was bound to trigger a revival in total spending. With inflation expectations knocked flat, it was to be expected that this would translate into gains in real output in the short term (though with inflation already showing signs of life, the Bank will need to be quick to withdraw the liquidity it injected).

Fiscal policy’s chief impact is on the composition of demand. It does not ultimately expand it. As was more or less the consensus in the economics profession, before the “policy panic” of 2008.

So all we got for all that federal spending was a $160-billion increase in the national debt, a pile of dubious make-work projects and a fistful of photo-ops for grinning Tory MPs. Which, after all, was always the point.




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News flash: no free lunch after all

  1. Oh, how adorably, McLeanishly, sophomorically cynical (and of course Liberal-boosterish). Have you considered the possibility that government stimulus did in fact stimulate some of that 0.8 percentage points attributed to private investment? If not, I should be grateful if you would do so and give us the benefit of your reconsideration. Thank you.

    • In what universe is this Liberal-boosterish?

      • One reserves the right to be provocative. And one is seldom wrong by accusing mainstream Canadian "journalists"of being Liberal Boosters. In this case, perhaps one should have said, "Harper Haters". In this, one is never never wrong.

      • Agreed, Ted. Govt does what the Liberals (and Dippers) screamed for, Coyne/Fraser argue that it accomplished squat, and that's Liberal-boosterish. I think it's more like a pox aimed at all their houses.

    • If the stimulus money had been spent on substantial infrastructure, like, say, new highways, new hydroelectric dams, expanding ports, that sort of thing, I could have bought it. That was a big part of the stimulus programs like the New Deal in the US in the 1930s and in similar programs of the time, not only to get people working but to create long-term infrastructure investments. The whole point is to treat this kind of stimulus not just as a way to pad some contractors' pockets until the economy hits an upswing again, which has pretty small return on investment, but rather to create infrastructure that will pay for itself many times over.

      Unfortunately, both here and in the States, the stimulus money has been little more than a bunch of glorified pot hole filling projects where the company who prints the government signs announcing how our benevolent masters in Ottawa are looking out for us probably makes as much money as anyone else (I dunno, maybe sign printers have been hit hard by the recession). Andrew Coyne is right, this was all about making the Government look good by basically spending money that probably would have done as much good being put straight into taxpayers' wallets as into paving over bumps in roads.

  2. Have the numbers and methodology been double checked by a reputable source? It's the Fraser Institute, after all.

    • I assume by reputable, you mean left-leaning.

      • you would be mistaken.

        • Then what did you mean? That Andrew Coyne and StatsCan ain't good enough for ya?

          • Base numbers are from Stats Can, methodology is not. I asked in another post, but haven't gotten a result yet – what did the Fraser Institute do with the Stats Can numbers to obtain its concluding facts? Without that, it's hard to ascribe any confidence to the study – for all I know, they could have pulled those numbers out of thin air (or rather, I suspect, cherry picked them).

          • Yeah, that doesn't seem to list their methodology. It describes their statistics, gives sources, but there's a disconnect between the source and their stats – Stats Can doesn't have the statistics the Fraser Institute uses. I assume they worked with the numbers somehow to derive with their stats, but they don't say how (or, I can't find it, at least – I've really hoping someone will point it out to me).

    • The stimulus report was peer reviewed as per our policy for all research. Our peer review policy (posted on our website) clearly states: "New research, major research projects, and substantively modified research conducted by the Fraser Institute is reviewed by a minimum of one internal expert and two external experts. Reviewers are expected to have a recognized expertise in the topic area being addressed. Whenever possible, external review is a blind process."
      Dean Pelkey, Fraser Institute Drector of Communications

      • Then how do you explain tax freedom day? Has your methodology in that area changed from not including capital gains, taking the average instead of the median, questionable inclusion of certain public fees as taxes, etc.

        • "Whenever possible" != "Whenever necessary"

  3. Andrew, allow me to congratulate you on not saying "I told you so" and linking back to your earlier writing at the time when the economic world seemed to be collapsing and the cries of "Stimulus! Stimulus!" rang thrpough the halls of Parliament. But, indeed, you did tell us so.

    • I do think Coyne is on to something in distinguishing between monetary vs. fiscal stimulus. I think there's no question in anybody's mind that monetary stimulus was advisable and required in the emergency circumstances that prevailed in late 2008-early 2009. Regarding fiscal stimulus, I think the jury's still out. This is just one study, there will be others, but it's a useful contribution to the debate IMO.

    • I don't get this. When At Issue on December 2008, it was Coyne, when asked who was the most underrated politician, he mentioned Ignatieff. Not once did Coyne, when he had a natinal audience in front of him, say: " Hey, listen up! You know what, Harper was onto something when he tried to downplay the severity of the recession."

      I did not hear Coyne talk about the differences between monetary and fiscal policies then, nor did I hear from him then that perhaps Harper could very well understand those differences.

      Why complain about all of this after the fact, if more of the MSM personalities could just as easily have made common sense when it was needed? " Which, after all, was always the point."

      • Needless to say, this is utterly delusional. Attack me all you want for my views, but I will not tolerate people putting words into my mouth or, as in this case, taking them out. I said all the things you claim I didn't say, many times, before, during and after the financial crisis.

  4. Exactly bang on.

    I'm thrilled to see an analysis like this, because I'd hate for anyone to think that this "stimulus" philosophy worked, and for it to be pulled out used any time there is trouble in the economy. That's a recipe for disaster.

    I was always sorry that Harper didn't stand his ground and refuse to partake in this stimulus nonsense. However, it certainly provided nice political cover for the massive deficits he was already running. I doubt any politician would be able to resist a nice juicy "get out of jail free" card to blame his deficit on after campaigning so vigouously against running one.

    • In hind-sight, the monetary stimulus may have been sufficient as well, but it was risky. Some strategic fiscal stimulus was necessary; not the part knee-jerk, part dilly-dallying reaction we seemed to get from the Harper government. Again, Harper seemed to be following the Republican's lead on this. They were talking big bail-outs/stimulus before the Democrats got in.

      • So, given the evidence that stimulus doesn't work, you want even more stimulus? That's strange.

        • I'm of the view that we need more evidence than a right-wing think tank that may have a bias against fiscal policy.

          • They take data from Statistics Canada. Are they a part of your vast right-wing conspiracy, too? Andrew Coyne? Who's been a relentless critic of the Conservative government?

    • He committed to a stimulus of 2% of GDP at a G8 (or G20) meeting (Peru,I think).

      You can take some consolation in the sad fact that he wouldn't even meet that commitment.

    • "I was always sorry that Harper didn't stand his ground and refuse to partake in this stimulus nonsense."

      Umm, isn't it pretty much accepted that had he "stood his ground", the government would have been defeated, Harper would probably be warming a chair somewhere at the University of Calgary, and Iggy would be PM, having likely injected at least as much fiscal stimulus as Harper & Co. did? Probably more, at the urging of the Dippers & BQ?

  5. "Have the numbers and methodology been double checked by a reputable source? It's the Fraser Institute, after all."

    Good question. Did you do any fact-checking, Mr. Coyne?

    On this, I'll go with my gut and believe it. I don't believe stimulus spending on free enterprise activities does anything useful. Other than major infrastructure projects, I'd have preferred making sure the social safety net was tightened up while we weathered the storm. But then the size of the financial economy, which at this point is nothing more than casino gambling, is so overwhelming that complete collapse at this point inevitable. So in fact, nothing anyone does will matter.

  6. "So in fact, nothing anyone does will matter."

    I should be more precise. The consequences of actions are just not predictable. Never have been really, but let's not deprive the economists of their delusions.

  7. Whew! now the cons can ramp up the libs made us do it rhetoric and have the additional bonus of being able to claim the 08 FU was prescient – team Harper/Flahety saw it all coming, right. That is if you accept the prmise that this gov't is not responsible for anything it initiates. Stiil, not to worry. The libs can hardly yell about the failure to not follow through with the FU now can they?
    But, aren't you discounting the physcological/ confidence aspect of the stimulus? Granted that's some expensive confidence. What would have happened to a gov't that didn't follow through on fiscal stimulus? I know it fits into your cons should act like cons thesis, but i find it a lot to ask of these cons to suddenly rediscover the faith. They've already made it pretty clear the road to majority runs through liberal territory. I'm just going to enjoy the irony of seeing the conbots check in and argue that the gov't did the right thing after spending a lot of energy insisting they had no choice [the liberals would have spent way more], and simultaneously claim the FU was a stroke of genius.

    • Whew! now the cons can ramp up the libs made us do it rhetoric and have the additional bonus of being able to claim the 08 FU was prescient – team Harper/Flahety saw it all coming, right.

      No they cannot. For the immediate reply is: You idiots caved because your own political fortunes were worth more to you than this country's best interests.

      At least, that will be my immediate reply.

      • You and i know that's how the narrative should run…but will it? We are talking politics here. The art of spinning the indefensible.

  8. Economic growth is based on investment, and investment is based on confidence. The Fraser Institute's numbers may well be correct purely in terms of the direct contribution of government spending to economic growth and what share of the pie this represents, but we wouldn't even be talking about growth at all if governments had not intervened with liquidity and loans to the auto industry to stop a potentially catastrophic collapse of the financial system. It's very easy to sit here today and say what a mistake it all was in hindsight but policy makers did not have the option to treat the potential collapse of our whole economy as some academic exercise. They learned the lessons of the Great Depression and reacted appropriately. The risk of total collapse and the potential cost both dictated and justified their strategy. They did the right thing in the circumstances.

    • M, that's an excellent point. People were soiling their underwear en masse at the time. A consensus — however valid — had developed among a lot of circles — and not just lefties and liberals — that massive fiscal stimulus was required. You cannot understate the importance of business and consumer confidence in a situation like that. As I've pointed out elsewhere, I work with a lot of business executives, and I remember pin-striped types who are normally fiscal conservatives saying at the time that this had to be done.

      Having said that, it's always useful to critically evaluate what's been done with our tax dollars, and I welcome the Fraser Institute's contribution to the debate, as long as their numbers and methodology are defensible.

  9. Ok, where to begin…

    1) I have no idea where the Fraser Institute is getting these numbers – I'm skimming a bit, but I can't find their methodology for this. Perhaps a more economically-literate poster can help me here. It looks as though the Fraser Institute is listing direct effects (investment or consumption directly from businesses, people or the government), yet going by that assumption, the stimulus spending should be much, much higher – $47 billion is 3% of our GDP! Sure, there is the decided possibility of crowding out, reducing the overall benefit of such stimulus significantly, but in that case we would see a drop in private investment and/or personal consumption, not a rise.

    2) There are many secondary effects to consider, namely jobs and confidence. Job growth, when it started to occur, largely occurred in the public sector, not the private. Jobs mean increased private demand. The Fraser Institute does not seem to account for that effect.

    3) There is the issue of confidence. Businesses make decisions not just on current conditions, but expected future conditions. Monetary policy had hit the wall and yet the situation was still fairly bleak back in Q1-Q2 2009, so the only potential source of demand would be outside the country (rather unlikely, given the state of our major trading partners at the time), so the expectation of demand coming from SOMEWHERE provided some needed stability at the time. The corporate tax cut, which the report does not tackle, likely contributed to this.

    4) Contrary to Coyne's assertion, stimulus spending did not wait until after Q2 2009, though it certainly would have been better to have had more out sooner – http://www.lesjones.com/2009/08/07/2009-stimulus-… – odd place to find it, but the source is ultimately the IMF.

    • Doesn't the increase in public sector jobs but not private sector jobs prove their point just as much, i.e. the stimulus – which was aimed at private sector jobs – did not work?

      Harper had already increased the size of the civil service before the recession to larger than it had ever been by the way.

      • Unless I'm mistaken (haven't checked the last jobs report thoroughly), the private sector jobs are starting to come again, but they came after the public ones.

        Besides, even if it was only public sector jobs, it doesn't mean that the stimulus was ineffective, because jobs are jobs and growth is growth, regardless of the source. Obviously, if private jobs don't pick up, the situation becomes unsustainable, but as stimulus is just now starting to roll down, it's too early to say whether or not they're really coming back and that the stimulus has worked in that respect (though the increase in private demand recently would say yes). In the short-term, however, the point of stimulus is to provide growth and jobs to halt a falling economy and push it back forward – it doesn't really matter where that growth and those jobs come from.

    • Sorry your chart shows nothing of the kind. a) It has "stimulus" spending for Canada in the range of half-of-one-percentage point, which is peanuts. b) It's for Q4-08 to Q1-09. The "stimulus" budget wasn't introduced until late January 09, with approval of the budget and estimates some time after that. Approval for specific projects took much longer, and the shovels didn't hit the ground, as is well documented, until well after that.

      • I assume what's listed there includes provincial stimulus – the Fraser report is not on only federal stimulus, but stimulus at all levels. They include it, I see no reason why I shouldn't too.

        But of course, point 4) is the one that means the least, it's point 1) that's the crux of all this – how can the Fraser Institute claim that a dump of 3% of GDP into the economy by the government not dramatically raise the government's contribution to GDP growth? Sure, it could crowd out private investment and consumption, thereby keeping total GDP growth stagnant, but that doesn't seem to be the case. Put simply, why isn't that $47 billion* counted as part of the GDP?

        *Note – I've been writing fast and checking less often, so I forget the actual dollar number of federal stimulus, but I'm quite certain it was greater than 1% of GDP this year, especially counting all levels of government – the chart shows a single-quarter stimulus of almost that much, before the federal government jumped into the fray. If I'm off on the exact about of stimulus this year, my question still stands – why isn't it counted in the GDP in the Fraser Institute's report?

    • The story you link to quotes one economist, Derek Porter, who says "I think such claims (that fiscal stimulus had no impact) have some merit" but then says we can't be absolutely sure of this, because we don't have a counter-factual (no stimulus attempted) to compare it to. Which is true. But the only example of "fiscal stimulus" he refers to, the debt-for-mortgage assets swap, wasn't part of the stimulus package at all, and was aimed not at Keynesian pump-priming, but at preserving liquid financial markets.

      • Keynes never talked about "pump priming" to the best of my knowledge. What he did talk about was the 'euthanasia of the rentier' – the use of all available financial resources to create wealth rather than pay rents. In other words, he wanted to increase the amount of aggregate investment in the economy to the point where the return on marginal investment would be zero. Although he does mention in passing that he was in favour of any measure which would "support at the same time all sorts of policies for increasing the propensity to consume", this is not the central thrust of his General Theory of Employment, Interest and Money.

        Not everything that current usage calls 'Keynesian' is actually Keynesian. I am surprised that you, Andrew, of all people, would fall into this trap. Keynes should not be blamed for every crazy inflationary experiment of the 1970's. Even then, if policy makers would have paid attention to what he said about money supply in the same book, they wouldn't have made such a mess of things and discredited the poor man with policies which had very little to do with his ideas.

        • All very true, and not the least at odds with anything I said. I said Keynesian, not Keynes. Keynes made his own share of mistakes, of course, but his followers add their own.

  10. Alright, a couple things:

    -I never supported 'stimulus'. I wanted to government to seize the opportunity of reduced capacity utilization over the next few years to get in some deferred maintenance and investment in infrastructure. We got some hockey arenas and new granite countertops: not what I had in mind.

    -Andrew, you mistakenly suggest that the $160 billion in deficits over the next few years is due to 'stimulus'. Some is. But more is due to the structural deficit that had nothing to do with the stimulus program. I'm ambivalent about stimulus (it was spent on the wrong things, but was not inherently a bad idea. A bump-up in the gas tax transfer to municipalities would have worked better). I am very hard on the structural deficit. Perhaps some of it could have been contained by spending growth, but the elephant in the room is the GST cut. $75+ billion of that $160 billion incremental debt is the GST cut.

    • My only concern with your last point there is that "structural deficit" becomes a bit of a line-drawing exercise, because it inevitably involves you deciding what the "base level" of government spending should be. That in turn involves value judgments, and more often than not ideological judgments (e.g., how big should government be in the ordinary course, what is a "core" govt program or service, etc.).

      • Nah. GST cut was unfunded. It's one thing to want to cut the tax, and another to do it without corresponding spending reductions. The latter is irresponsible as it creates a structural deficit.

        • I don't think you really addressed my point there, but in any event, I concede that I don't have the numbers handy to prove or disprove what you're saying in your reply. I do recall that we were in a surplus position — and rather a significant one — immediately prior to the GST cut.

          • Do you understand what a structural deficit is? For the budget to be structurally balanced, deficits during recessions must be offset by (yes, even large) surpluses when the economy is firing on all cylinders. So, "there was a big surplus in 2006" does not mean we were in a structural surplus position.

          • Yes. Plus let's just get this out of the way: I think you may be mistaking me for someone who supported the govt's GST cut. I did not, and do not. I was convinced a long time ago, when I took a course in tax law, of the superiority of consumption/value added taxes. Personally, I'm a fan of the taxation model of high consumption taxes, low income and corporate taxes.

            Really my only point in my original reply is this: just exactly where the "temporary/stimulus" deficit ends and the structural deficit begins is, to some extent, a line-drawing exercise. It depends in part on certain timing factors, what you include and exclude, what you consider to be "normal" economic growth, what you consider to be a normal/core level of government spending, what you consider to be an optimal level and model of taxation, and so on. If you gathered a bunch of economists together, I practially guarantee you that they would not agree on all (or even most) of those factors, at least not with precision. Thus they would all come up with different numbers when asked to give a figure for the structural deficit.

        • I don't think you really addressed my point there, but in any event, I concede that I don't have the numbers handy to prove or disprove what you're saying in your reply. I do recall that we were in a surplus position — and rather a significant one — immediately prior to the GST cut.

  11. What Mulletaur said.

    After all the automakers, and in the US the banks and investment firms did quite nicely with immediate cash infusions from government. Yeah, they stayed in business, but nobody had any money to buy cars.

    You can't prove a negative, yes, but the Fraser report only confirms that not being in a hurry didn't make anything worse. What would have been the effect of immediate fiscal stimulus on the economy?

    It couldn't have made things worse.

    • Except that it increases the deficit for no apparent good reason, right?

        • If the only reason those people have a job is because they were paid from tax revenues, as opposed to any real demand for their labour, do you see the problem?

          • Then don't give the fricking corporations government money either andpay the cities the gas tax so they can take care of their roads.

          • Then don't give the fricking corporations government money either

            Either? You think I was in favour of government money going to fricking corporations? Hello? (tap,tap) Is this thing on? (tap, tap)

          • Well, you can tear down a house a brick at a time, or blow it all up at once. You have a global financial crisis. who should the government be allowed to hurt?

          • [W]ho should the government be allowed to hurt?

            That question appears to be settled: The ones who have had absolutely nothing to do with the present economic downturn. The ones who don't even presently understand what's coming to them. Who do you hurt? The kids.

    • It couldn't have made things worse.

      Oh, hello there, Federal Debt…

  12. So, the Conservative government were inept! They saddled Canadians with a structural deficit needlessly. For this to Canadians they should be trounced in the polls and tossed out on their collective rears!

    You say no, not their fault, the opposition made them do it? OK then, what about the rational that the Conservatives said they would never go into deficit and that their policies and ideologies do not support spending and going into deficits. But wait, they did spend and continue to spend and they did go into deficit. Sio they really do not have any policies that they actually govern by. They govern by the collective seats of theis own arses and as such blow whichever way the wind blows. They have no convictions that they live by, they'll do whatever it takes, and if that is wrong they'll blame it on somebody else!

    Well, for that attitude they should then be kept in place and Canadians should be glad they have such a smart well thinking astute political party leading this country. After all, not everyone can read financial tea leaves and get it right every time! We are far better having a Conservative government that makes it up as they go along than say a Liberal governmment that may not be perfect but that did have a substantial surplus which Canadians could tap into should the need have arisen. Yes, I'm sure we are much much better off with the rudderless guessing Conservatives at the helm!

    • "For this to Canadians they should be trounced in the polls and tossed out on their collective rears!"

      "You say no, not their fault, the opposition made them do it?"

      So, that leaves us with just one choice…trounce the liberals…er..Houston we have a problem!

  13. Why would you believe what the Fraser Institute says? It's just a propaganda factory.

    And what makes you so sure we are recovering? Are people finding jobs?

    • Q4/09 growth 5% annualized, Q1/10 growth expected to be nearly as strong. 159,000 net new jobs since July '09.

    • It's all psychological. You're just supposed to believe whatever it is they want you to until the next inevitable crash makes the truth difficult to hide.

      My guess here is that the Fraser Institute wants whatever government is likely to be formed after the next election to cut government spending drastically and has put out this report to begin to shape public opinion. No more, no less.

  14. Now if only there was some young economics grad student who wrote a thesis on economic stimulus during tough economic times and how it never helps, and that economics grad student went into politics and someday became Prime Minister, then… oh, wait…

    Let me retry.

    Now if only we had a decisive, principle-driven politician who mocked poll-driven, vote-buying politics of the other side, and who claimed as late as the eve of the recession that stimulus spending doesn't help and he won an election and became or remained as PM and then he… oh, wait.

    Nevermind.

  15. Well, if the economists were against this in 2008, what turned them all into neo-Keynesians in 2009? Political pressure? Ideology? Liberal friends?

    It will be interesting to see what the ultimate analysis of fiscal stimuli will be when this financial crisis is behind us.

    However, I haven't been a big fan of these stimulus packages because they specifically don't do what they're supposed to do, which is to stimulate the economy in the here and now. Most of the spending happens well after the crisis is over, and that's by design.

    In fact, the only thing that these things seem to stimulate is government jobs and government-friendly contractors, who usually are the last to hurt in the crisis to begin with. But I guess that's why the left loves Keynes. It helps their grip on government and power.

    Look at the States. The stimulus package was over $700 billion, and their economy keeps bleeding jobs faster than Obama can sign a bad bill into law.

    • their economy keeps bleeding jobs faster than Obama can sign a bad bill into law.

      But count on Obama to keep up the effort on his side…

      • Don't know what stats you are looking at but the US private sector job numbers are getting better (slowly) not worse and I think are better than our private sector job numbers.

    • " But I guess that's why the left loves Keynes. It helps their grip on government and power"

      And we have a leftist gov't , right. I know, it would all have been so much worse if it were the case.But it wasn't.

      • So, are you going to rebut what I actually wrote any time soon? Man, you are the most tiresome troll-like poster on here.

        • i did. Sorry you couldn't follow. Wont me to write it incrayon for you? We don't currently have a lib gov't. So even if you're right that stimulus only seems to stimulate "… is government jobs and government-friendly contractors…'
          what the hell has that to do with your endless carping about the left?

          "Man, you are the most tiresome troll-like poster on here"

          Pot meet kettle…

          • Gee, last time I checked, it was the left-wing that was in favour of big government and big-government spending, and it was conservatives who were for limited government.

            So, even if you have a Conservative party that passes a smaller stimulus package, what does that have to do with the left-wing's love affair with stimulus packages?

            This is what I have to deal with from you.

            Again, if you're not up to speed, don't bother me. Seriously.

          • Don't know why we let conservatives/right get away with the myth that the right-wing doesn't favour big government or big-government spending.

            Reagan increased the size of government and spending. So did Bush 1. Bush 2 increased spending more than any other and increased the size of government.

            Same thing here: no PM has ever spent as much money as Harper did before the recession and no PM has ever overseen a civil service as big as Harper has grown ours.

            By contrast, Clinton and Chretien cut spending and cut down the size of the civil service.

          • Ideologically speaking, do you think that conservatives favour big government spending?

            You can always find examples that somewhat contradict the template. But they're more exception than rule.

            Harris cut, and you lefties protested every bit of it. Obama is making Bush look like a spendthrift, and I don't here much of a peep from the Chretien, Clinton types.

          • I think Harris – who I not only voted for but campaigned for by the way – is the exception that proves the rule.

            The very next premier, Eves, was increasing payments and left a huge deficit.

            Other than Harris, what conservative/right US President, Premier or PM has cut more spending than they increased? None – absolutely none that I can think of but I can think of two liberals – Clinton and Chretien (and yes, the lefties and conservatives still to this day complain about the cuts they made).

            I think conservatives are just as big spenders despite their rhetoric, they just spend on some different things – missiles, guns, jails, censorship (more in the US than here like under Reagan with Meese and with the FAA).

            But the commonality is that right and left politicians – Bush and Harper being good examples – can't help themselves with taxpayer money for pork and earmarked pet partisan projects.

          • In fact, I would go further than that and say that not only does the governance behaviour of conservatives conflict with their rhetoric, not only is there an inherent and deep-rooted conflict between two core principles/rhetoric (small government vs big military/security/police), but right wing principles are more naturally inclined to fiscal irresponsibility than liberals.

            Since they believe in big spending and never cut spending, but at the same time believe in cutting government revenues, the increases in the deficit and the debt by Reagan and Bush 1, and the turning of a surplus into a deficit by Bush 2, Eves and Harper is the inevitable and logical result of core conservative principles. As Dick Cheney infamously said: "Reagan showed that deficits don't matter."

          • Examples that "somewhat" contradict the template??? More the exception than the rule???

            Government spending and the size of government increased under 3 of the last 3 Republican Presidents, and 2 of the last 2 Tory Prime Ministers. Government spending and the size of the government decreased under 1 of the last 2 Democratic Presidents, and under 1 of the last 2 Liberal PMs.

            I'm sorry, but if you have to go back to Diefenbaker and Nixon as examples of conservatives who fit the "template" of conservatives who believe in less spending and smaller government and actually DO SOMETHING CONSISTENT WITH THOSE BELIEFS then I question the accuracy of the template.

            Conservatives may well believe in smaller government. The fact that no federally elected conservative leader in Canada or the United States has actually done anything other than increase the size of government in the last 40 years or so makes that "belief" kinda moot though, doesn't it? I'll start believing North American conservative rhetoric about wanting to reduce the size of government when I see a North American conservative political leader at the national level reduce the size of government. It hasn't happened in my lifetime, so far.

          • Ehm, the Conservatives increased spending at least double inflation every year they've had power. And they kept getting votes. All those right wingers in favour of big government and big government spending.

  16. Liberals (and the NDP) advocated for the government to step in and offer stimulus as much as Conservatives.

    The Fraser institute's numbers, I would argue, are a narrow reading based on small-c-conservative principles.

  17. I remember a time when Coyne would poke holes in Fraser propaganda, rather than promote it to confirm his own bias. He was a better pundit then.

    • Have you considered the possibility that I was only formerly poking holes in Fraser studies when they disagreed with my biases? In which case I'm just as bad a pundit now as I was then.

      • Actually, I think that would mean that you're just as GOOD a pundit now as you were then.

        The difference is whether or not one sneers when saying the word "pundit".

  18. Andrew, don't you get it? The coalition FORCED the Conservatives to do everything wrong and unnecessary for this country, and when we end up with a $625 bn debt, that will be the coalition's fault too. /sarc

    • Would they have not introduced an even larger stimulus package?

      • So, sure, the Tories drove us off a cliff, but it's the opposition's fault because they wanted to drive us off an even BIGGER cliff??? OK, for the sake of argument I'll concede that I guess.

        Now, has the fact that the Tories drove us off a slightly smaller cliff than the Liberals might have changed in any way the speed at which the ground below is approaching?

      • Not to mention the "second round of stimulus" Ignatieff was demanding at one point…

  19. Stephen Harper knows better than the Fraser Institute–because he knows that all that stimulus spending helped hide the structural deficit his government had already created. The stimulus spending did him a lot of good.

  20. As far as I can tell, only a tiny fraction of the stimulus money has been spent so it is no surprise that money not yet spent had no impact on the economy. (by spent I mean, paid to a person or company for an actual good or service, not earmaked, committed, accounted for, transferred to province etc).

  21. I'm not too up on the terminology when it comes to quarter-to-quarter growth, but can someone explain to me why the Fraser Institute is looking at the change in growth of GDP between each sector, rather than the growth itself?

    For example, the report lists the Government's contribution to GDP growth in Q2 as 0.4% – 0.2 from consumption, 0.2 from investment. In Q3, it's 0.5% – 0.2 from consumption, 0.3 from investment. Now, I read that as government contributing 0.4% of economic growth in Q2, then 0.5% in Q3, meaning the government increased GDP by about 0.9% from the start of Q2 to the end of Q3. But the report focuses on the difference between the two quarters, 0.1% – why? All that tells me is that the government's contribution to GDP growth is only slightly higher in Q3 than it was in Q2, but generally speaking, we talk about GDP growth, not change in GDP growth when discussing the economy.

    I would really appreciate some insight on this, from anyone, because right now the Fraser Institute's numbers (assuming they're valid, which I'm also having trouble accepting without explanation) don't seem to match their conclusion.

    • I'm kind of disappointed that I'm not getting some more insight from posters on this (especially Coyne, who has been active on this forum until late). But since I'm not, I might as well keep going with the interpretation, because it seems to better square with other information (namely the size of the stimulus and its contribution to the GDP).

      Basically, this report uses stats that say nothing about the effect of the stimulus, only the size of government. The GDP growth (or change in the GDP) from government consumption or investment is basically how much the government grew in that quarter relative to the one before. That includes stimulus spending, other increases in spending, then accounts all for growth/decline in total GDP and for inflation. A positive number means the government is growing, a negative number means it's shrinking.

      What the Fraser Institute is using to derive their conclusions is the change in the GDP growth from government consumption or investment, which is basically the change of the change of GDP. If it's positive, it means the government's growth is accelerating, and if it's negative, it means the government's growth is decelerating. That says absolutely nothing about the effect of stimulus money, of course, only about the size and timing.

      Based on this, any conservative should really want to see low numbers in the change of government-based GDP growth – it might not mean a shrinking government, but it would mean one that's growing less rapidly. But that's not what either the Fraser Institute and now Coyne are saying – rather, they're using that stat to somehow say that more economically liberal policies don't work, even if the government had been more economically liberal, and was accelerating its growth, their analysis would indicate that the stimulus worked! Of course, this statistic says nothing about the effectiveness of liberal or conservative economic policy, but it shows the deep flaws in the Fraser Institute's analysis.

  22. It`s unfortunate that Harper was not voted a majority in the 08 election. Had he been then Mr. Coyne would be much more pleased with our deficit situation today.

    Stimulus spending would have been limited to Home Reno grants and some needed infrastructure spending. The emphasis would have been on keeping interest rates low, encouraging banks to be more cooperative with business and homeowners, and probably some tax deferral programs to encouraging reinvesting. Auto bailouts would have been replaced with strict loans and payback conditions.

    Oh, and there would have been no $1.95 per vote subsidy and no threats from coalitions. But the streets would have been full of whining Lib and Dip supporters claiming Harper was the meanest man since Genghis Khan. But Mr. Coyne wouldn`t be on the street……nor I.

    • Pure idle speculation that is contradicted by Harper's own words and actions. He's the biggest spending PM in our history and he was so before the recession, he's had the run of Parliament with a chicken-sh*t opposition in disarray, and he brags about the stimulus spending.

      • Ted, It sounds like you are opposed to stimulus spending now but this " chicken-sh-t " opp. you speak off would only allow the minority gov`t to govern if they went on this massive spending spree and it was the opp. idea to have Harper to report ( brag ) about the progress on this spending.

        The voters may consider that in the next election and decide a majority CPC gov`t is a more fiscally responsible choice.

        • I disagree. No one asked the government to go on "this" massive spending spree. Harper took pains to tell usthat he had no input from the opposition on his record-setting budget of 2009. No one in our history has ever spent that much money so there is zero basis to conclude everyone else would certainly have spent more. We have no idea what a Liberal government would have spent, but we know it would have been less.

          As for a majority, Harper has essentially had a majority and this has been the result. The only thing that the opposition has been mildly successful at is getting him to provide a modicum of accountability. No, scratch that. They haven't even been able to get Mr. Accountable to be accountable. But they have shown that he doesn't give a crap about accountability or transparency, but that is about all they have accomplished.

          Harper has done whatever the heck he has wanted to do. He would be no different under a majority, although he might be even less inclined to undertake interviews or go through motions of seeming to care what Canadians think (like his multiple gymnastic flip flops the last two weeks).

  23. I continue to hold out hope that part of the reason the Cons have been so vague & rosy in their deficit reduction strategy is because they are planning to pull the plug on "stimulus" spending sooner than they've let on.

    • As long as it is only your hope and not your breath that you are holding, no harm done I suppose, other than dashed hopes.

  24. Before anyone can claim that "changing X did (or did not) cause a change in Y" one needs a control group in which X didn't change. No amount of sophistry, arm-waiving, or statistical analysis can change this fact. Since we have no control group (i.e. a Canadian economy in which no stimulus was added) then neither the Fraser Institute, not the Conservatives, not the Liberals, not Andrew Coyne can answer the question. Maybe the economy would have been in depression if not for the stimulus? Maybe it would have been exactly where it is now?

    • Indeed, if the Fraser Institute actually looked at the stimulus' effect, this is what they would need to be certain or their findings.

      But, that's not even close to what the Fraser Institute seems to be looking at. The report lists each sector's growth as a percentage of GDP, then takes the change in that from Q2 to Q3, then Q3 to Q4. Then it takes the change the the growth of the government's contribution to GDP and bases its conclusion about the stimulus on that figure.

      Yet, all that figure says is that the government is growing at a different rate in one quarter than the previous quarter. At best, that's just a loose indication of the size of the stimulus, but says absolutely nothing about what that stimulus does!

  25. Fine, if you will likewise consider the impact of a 2% prime rate — which unlike fiscal stimulus, was in place, in effect and in time to have some impact on these numbers.

    • Point taken. Thank you. We must wait for the next batch of statistics and their interpretation by Fraser, whatever that is worth, to see what the stimulus has meant. One has always assumed that the great fear of all governments was rapidly increasing unemployment and that this fear was a prime justification for stimulus spending. Make work projects are as Canadian as the sentiment behind King's "conscription if necessary, but not necessarily conscription".

  26. Serious question… is there any room for Canada to back down on some of the stimulus projects that haven't broken ground yet? Couldn't we save a few billion that way?

    • I've thought the same thing. I've also read somewhere (can't remember) that the gov't was 5-6bn BEHIND on stimulus spending. I could see the Harper gov't keeping some of the $ behind, and then claiming a massive savings on the "stimulus program" once the economy was in full recovery mode. They'd be able to say that they saved the economy on the cheap, while the rest of the world is still burning. Harper would be a national hero.

  27. Problems with the Fraser Institute report, including:

    Government's "…job is to smooth out economic fluctuations by spending counter-cyclically and this is precisely what they did this time. The Fraser Institute researchers does not find evidence of that because they do not look. They focus their attention exclusively on the last two quarters of 2009, when recovery is starting to take hold…"

    http://www.progressive-economics.ca/2010/03/24/ta

    • So the Progressive Economics Forum is now on record as confirming that the Harper Government made exactly the right choices as it steered the Canadian economy through the global economic meltdown and into the recovery. Who'd have thunk it?

      • Of course the Harper minority government had to be forced to make the right choice.

        • Yes, sometimes that happens in life. Some would argue that that's an example of a minority Parliament working as it should.

          To me, the bottom line is that the Fraser Institute study is a bit of an exercise in bean-counting and number-crunching, with the virtues and shortfalls inherent in that. It's virtually impossible to quantify, in a retroactive cause-and-effect manner, the extent to which these measures inspired the confidence among business and consumers that was necessary to arrest the potential economic meltdown we were facing.

          Whether this much spending resulted in that much growth (or did not) — while I'm glad that economists look at that and consider it, to me, it's a bit of a mug's game.

  28. I don't get this.
    When At Issue, on December 2008, it was Coyne, when asked who was the most underrated politician, he mentioned Ignatieff. Not once did Coyne, when he had a national audience in front of him, say: " Hey, listen up! You know what?? Harper was onto something when he tried to downplay the severity of the recession."

    I did not hear Coyne talk about the differences between monetary and fiscal policies then, nor did I hear from him then that perhaps Harper could very well understand those differences.

    Why complain about all of this after the fact, if more of the MSM personalities could just as easily have made common sense when it was needed?

    " Which, after all, was always the point."

    • Maybe because the recession was severe, and the voting public decided in their collective wisdom that something needed to be done.

      Even if it wasn't the most effective or appropriate solution.

  29. I note no answer to my question about believing the Fraser Institute. Have any of the economists working for the Fraser Institute had their work published in academic journals? Have they passed any peer reviews?

    • the D of C for the Fraser Institute posted a reply, above, which would indicate that just about all the economic stuff they publish is peer reviewed by field experts internally and externally.

      Much though I'm not ideologically aligned with them, I'll give them props for that.

      • Well, I would wonder what the criteria for calling someone an expert would be and who applies that criteria.

  30. *Physics geeks alert*

    Depends if the cliff the the Tories drove us off is high enough for the car to reach terminal velocity. Otherwise, yeah, the ground would be approaching faster when going off the Liberal's slightly larger cliff, at least when we all hit that ground, in this completely hypothetical and disturbingly morbid scenario…

  31. *Physics geeks alert*

    Depends if the cliff the the Tories drove us off is high enough for the car to reach terminal velocity. Otherwise, yeah, the ground would be approaching faster when going off the Liberal's slightly larger cliff, at least when we all hit that ground, in this completely hypothetical and disturbingly morbid scenario…

  32. The Fraser Institute's report is deeply flawed. It does not actually examine stimulus as a share of economic growth. Instead, it compares the rate of increase in stimulus between quarters, which is interesting but in no way supports the Fraser Institute's (or Coyne's) conclusion. My blog provides a detailed critique.

  33. I don't know where all these "dubious make-work projects" are located because in my city (Ottawa) all the infrastructure stimulus projects have been pulled from the city's long term capital plans. I know it's the same in some of the other major cities. Projects that had previously been put off for years for lack of funds are now being built. We have a massive infrastructure deficit in this country and all that this stimulus funding does is put a small dent in it, but I suppose it's easy to forget the problems we had before the recession. Moreover this infrastructure spending comes at a time when the cost of construction and materials is somewhat lower than it has been, or has everyone conveniently forgotten the cost inflation for infrastructure projects in 2005-2007 since government and the private sector were competing like crazy to get stuff built? It was particularly wild in Alberta. It's just too bad that this didn't seriously get underway last year, but being a year late should not be used as an excuse to put if off for a few years until we discover we needed it all along and it's a lot more expensive to build.

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