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Why doesn’t the government break up the budget?

The Tories should focus on stimulus in the short-term. Move on the rest later.


 

This month’s federal budget is shaping up as a behemoth. Not only is it expected to include a massive deficit to fund aggressive stimulus spending and tax cuts, Prime Minister Stephen Harper said last week it must chart an economic course for three to five years. Finance Minister Jim Flaherty said that along with juicing the economy to fight the recession, his Jan. 27 fiscal plan must provide relief for laid-off workers, lay the groundwork for Canada to pounce on opportunities when the recession ends, and—hey, what the heck—consider the usual range of niche spending projects. All in, Harper said hundreds of ideas are being considered, implausible as that sounds.

It’s increasingly obvious that this is all too much too fast. The government just hasn’t been contemplating such ambitious measures long enough. Consider that as recently as late November, Flaherty was still voicing doubt that any additional stimulus would be needed. And not only is the government grappling with the world economic crisis, in the run up to Harper’s meeting with premiers later this week, it’s also dealing with other major economic questions—notably the Tom Hockin panel’s finding that Ottawa has the constitutional power to set up a single regulator for stock markets, if it sees fit.

Complicating the entire budget-making process even further is the political backdrop. Harper must come up with a budget that satisfies the Liberals sufficiently for Michael Ignatieff to decide to let the Tory minority live on, rather than defeating it and trying to exercise (if he can get the Governor General to play along) his coalition option. The combination of daunting economic policy challenges and tricky politics makes it look all but impossible for this budget to do everything it’s supposed to do.

So why doesn’t the government just break it up? All that’s needed quickly, after all, is a stimulus package to offset the immediate damage being inflicted as the recession takes hold. Get moving on infrastructure, and perhaps some employment insurance changes aimed at getting some spending money into the hands of the newly jobless. Then back off and spend the following month or six weeks finalizing the more far-reaching elements of the economic plan—worker retraining, measures targeted at troubled industries, programs designed to help the economy bounce back in better days, any special projects deemed worthy of money in tight times.

There’s no point in rushing unduly on many elements. A convincing stimulus package can be carved off and done on its own. Then Harper and Flaherty can use the ad hoc consultation process they have rushed to put in place to better effect, tapping the experts they have lined up, to help create a credible medium-term plan to be tabled in, say, late February or early March. (That’s normally budget season anyway.) The mood in late 2008 turned all panicky. Time to establish a more sober style for 2009.


 
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Why doesn’t the government break up the budget?

  1. It’s increasingly obvious that this is all too much too fast. The government just hasn’t been contemplating such ambitious measures long enough.

    Oh don’t be such a worry wart. The US put together an $800 Billion package in a matter of a couple of days, didn’t they?

    • You’re right. As Harper said to Mr Whyte, they’ve been planning all along to present a budget in January. It wasn’t a departure from earlier plans at all. Mr. Harper wouldn’t lie to us about a thing as important as this…

  2. Good thought, very well presented article… however i think it should be helpful to others too at large scale… so lets educate many others with the help of different sites… i and many of colleagues, relatives and friends use justmeans…. http://www.justmeans.com/ … the only site to learn new stuff revolved with “Corporate Social Responsibility” “Green Jobs” “Waste Management” “Energy” “Ethical Consumption” “Politics and Governance” “Social Investment” “Social Media” and “Sustainable Business” and that too from the industry experts.

  3. Why doesn’t the government break up the budget?

    That’s a very good question. Spending 200+ billion dollars on the basis of essentially one single vote strikes me as rather absurd.

  4. I am not a fan of stimulus spending, other than tax cuts, and I have been wondering why our pols rush to spend before it’s clear what the problems are. Why is it thought necessary to spend now when the we are just entering the recession. If our pols desire to get people spending, wouldn’t it be more effective to wait a bit for people to panic, bunker down, reduce household … etc and then respond with economic package that gets people spending again.

    I don’t believe it’s possible to get people to behave in a way they aren’t prepared to, which is what stimulus spending relies on, so why not wait till people have responded to their changed circumstances and then turn on the public spending spigot.

  5. I have been wondering why our pols rush to spend before it’s clear what the problems are.

    The problems are clear. Of course I don’t expect someone who probably, just a few short months ago, didn’t think there were any problems to see that.

    • If the problems we facing in Canada are clear, Robert, what are they? And the problems we are facing today, are they same as a few months ago and will they be the same six months into the future?

      Our economy is tied very closely to US. Do you, and our pols, know exactly how the US economy is going to develop over the next six months after Obama introduces his stimulus plan even tho we have no clue what the package is going to contain because it’s yet to be written.

      If it is all so obvious, why is there plenty of disagreement about what Flaherty and US Congress should do.

      • A number of the people I pay attention to seem to be thinking that the proposed stimulus – both US and Canada – will be a case of too little and too late.

        • Surprisingly enough, the sources I read say the proposed stimulus package will be entirely feckless no matter how much, or when, the government spends it. Unless the package is all tax cuts, unlikely I know, which would be useful.

        • You are so correct because this is what most bankers are now advising …….. and 180 degrees south of spending and borrowing ….. no more toys for boys or trips south on credit ….. stimulus means food shelter and clothing and clothing was what Santa brought …. so that leaves?

          Pay off debts, save money for emergencies and plan for the future. Advice that is applicable no matter what the current economic situation.

        • They’re saying that because they’re hedging. Given the history of “stimulus”, they can say that it was too late, or not big enough. Not only that, they can claim they were saying so right from the start. Ask Japan how 20 years of stimulus is treating them. (Interestingly, I had initially typed ’15 years’, and had to correct it. Has it really been 20 years since Japan’s real estate bust? Seems almost impossible to believe. Time flies when you’re being stimulated.)

      • In the past 3 months most of the people here have spent many hours discussing those problems–from collapsing auto manufacturers to rising unemployment–on this very forum, jwl. If you didn’t pay attention I suggest you dig into the archives and bring yourself up to speed. This time you might try actually paying attention to what people are saying rather than looking for opportunities to regurgitate propaganda.

        • C’mon, Robert. There is no problem to which a tax cut is not a solution. Hangnails …..

  6. I suspect the government’s reluctance to bring the stimulus package forward before the rest of the budget may have more to do with politics than public policy concerns (I know, I know; try to contain your shock), since that could allow the Liberals – heck, maybe even the NDP and the Bloc – to vote for all that spendy goodness in January, and then promptly turn around and condemn the budget when it comes out in March – not voting against it, mind you, but playing for time by promising that they’ll pull out all the stops to fix it, whether in the House or at committee – with an eye to bringing down the government – “more in sorrow than anger”, of course – sometime in May.

    • Kady

      Do you have a sense of how keen Cons are for an election? If they want to go to the polls soon, while the Coalition of socialists and separatists is still fresh in peoples minds, wouldn’t that be a reason to play out the scenario you suggest. However, if Cons are quaking in their boots about the prospect of an election, it makes sense not to break up budget and stimulus package.

      • Oh, I don’t think they’re particularly keen on the idea of an election, ostensibly widespread coalitionphobia notwithstanding. But if they *have* to go this year, they’d rather force the opposition parties — particularly the Liberals — to vote against all sorts of feel-good spending initiatives- infrastructure funding, tax cuts, that sort of thing – rather than go down to defeat over the business end of a split budget, which will almost certainly have to include some less than popular policies.

        • That makes sense. Thanks Kady.

        • Don’t forget the “puppies for orphans” program… how heartless would you have to be to vote down a budget that contains a feel-good initiative like that?

      • You’re assuming we would go to the polls if the budget fell. Given the two hour meeting between Mr. Harper and her Excellency, and the amazingly quiet conservative party we’ve seen since (hardly a peep about how the coalition is evil incarnate, for instance) I’d suggest the odds are against that.

        • Oh, they’re only being quiet because they are working SO HARD on the budget.

  7. I expect the budget to be, primarily, a campaign device. If this is the case, I suspect that, while designed not to satisfy the opposition and to precipitate an election, it will also offer things that appeal to many in the electorate, especially targetted groups and the west. Maybe I am just being too cynical…

    • Remember, budgets *can* be amended at committee, although the onus then falls on the government to decide whether to declare any change to be a vote of non-confidence.

      • beware, the pod people (parliamentary obstruction document) are nigh…

  8. John, let me try to answer your question thusly:

    S Harper, during the campaign: Now is not the time to do anything rash or stupid.

    Government policy, a few months later: Now is precisely the time to be as rash and stupid as possible.

  9. Yes, well it became necessary for Harper to reverse for two reasons;
    1. That’s what he does and,
    2. He has a new economic advisory committee working for one dollar a year each and that’s what you get for a buck.

  10. Harper is probably secretly hoping that the two opposition will join with the separatist Bloc to defeat him. This coalition would last about two months.Layton with an ego as big as one could get would be continuously trying to make the academic and boring Ignatieff look like the lesser leader of the two of them. Duceppe is the modern Judas waiting to land a sucker punch that will assure him of all seats in the next election in Quebec

  11. Katy….

    All that you say may be true …… but why did Flaherty do what he did last time? ….. they are fooling nobody when they say they did not know what was coming ….. and they know it will be years (2015) until things are stable again ….. Hello California is broke and soon it will be Tornado Season followed by Hurricane Season …. followed by Fire Season …. and the US is our largest trading partner …. oh yea then there is Iraq and Afghanistan ….. will he really spend it all in one big sweep. Katy …. do we know just how deep in debt we really are and do we really know the actual costs for Afghanistan ? all this must be figured into Harper’s Budget ……

  12. Sorry Kady …… Happy New Year …… you will have much to write about in 2009 . The opposition has a valid point ….. we only know half of the crap that they had to take from Harper. Question Period was a disgrace and committees were ruled by a 200 page book and they now have decided “NO MORE” who could blame them for saying enough is enough. Down deep I do not think Harper really wants to govern in this time of economic world crisis ……. the truth be known he has never had any real job or lived in any times of hardship …… he is a control freak. What is coming down is going to take a real team effort Kady and any leader we have must be able to take plenty to the world table when asked.

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