Dodge says not so fast with the stimulus spending

David Dodge, the former Bank of Canada Governor, is starting to sound like the closest thing we have to an economic sage. I guess it goes without saying that he will be respectfully ignored.

Earlier this afternoon, Dodge was interviewed by Don Newman on CBC Newsworld’s Politics, and he urged the government to ease up on its unseemly rush to start spending billions, ostensibly to stimulate the economy.

“What we’re going to spend this year isn’t going to change the outcomes in 2009 very much,” Dodge said. “It certainly will change outcomes in 2010, ’11, and ’12.”

Since this year’s grim economic trends can’t be quickly reversed by a few billion in taxpayers money hastily poured into who-knows-what projects, why not slow down a bit?

Dodge said it would make more sense to take the time to find wise uses for all that deficit spending. “In fact,” he said, “it’s more important that it be spent on things and done well so that it enhances our capacity here in Canada to meet competition from abroad and grow in the second half of the next decade.”

Not only is Dodge unconvinced that accelerated spending would ease Canada’s economic pain in 2009, he’s not even calling for a policy of making sure stimulus billions are spent in 2010. He’d be satisfied with some expenditures flowing in 2011-12, “as long as it’s concentrated on things we need to do to improve our productivity and our competitiveness.”

Doesn’t that sound about right? What are the chances that, say, three years from now we’re going to be looking back at this moment and remarking, “Wow, the government sure managed to prudently invest billions and billions of dollars, even though they did so at an ungodly pace, in the teeth of a world economic crisis, with minimal planning and next to no oversight!”

If anything is going to take the edge off bleak economic tidings in the next few months, it’s going to be the Bank of Canada’s experimental bid to free up commercial bank lending, along with President Barack Obama’s plan (still a matter of intense political wrangling) to shore up the economy of our biggest export market, and maybe whatever comes out of next week’s G20 summit in London.

And so, if short-term direct spending by Ottawa is not, as Dodge tells us, likely to be a decisive factor in the economic mix, why the headlong drive to shovel $3 billion out of the federal treasury between April and June? Why does the government need to spend all that money without telling us much of anything in advance about where it will actually go?

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