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.