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Wednesday, May 27, 2009

Don't blame the economy


As we all know, Finance Minister Jim Flaherty announced yesterday that the government's 2009-2010 budget deficit will be upwards of $50 billion dollars, rather than the originally planned $33.7 billion laid out in the budget.

Surely, though, this is simply a result of poorer-than-expected economic performance, right? The finance minister and government couldn't be at fault.

Not quite, says Terence Corcoran.

... blaming growing deficits on the recession and unforeseen turns in the economy is a political device rather than a solid explanation. Today's deficits in Ottawa are a direct product of five years of fiscal expansionism and continued spending increases. Spending has been rising at twice the rate of population growth and inflation, an unsustainable trend.

In a commentary today in the Financial Post, the Fraser Institute's Niels Veldhuis plots the numbers. Mostly under a Conservative government, average annual spending rose 6.2%, exactly double the rate of growth suggested by the increase in population and inflation. Spending this year is heading for a gain of more than 10% - before taking into account the final auto bailout numbers.

When governments run up big spending increases during boom times - as Ottawa and all the province did - then there's nothing left to tap into when the economy slows down. There's no buffer. Revenues fall and spending growth increases, creating a deficit trap from which there is no escape other than waiting for the private economy to catch up with public spending and begin the "Now you pay for it" phase.

Veldhuis, in his article, suggests legal restrictions on government spending to help to keep it from getting out of control as it has in Canada and, to be fair, all over the world. Canadians ought to see his point.

Posted by Janet Neilson on May 27, 2009 | Permalink


When a so-called right wing conservative like Harper (and Bush) spend like Trudeau, what's a left-libber like Iggy (and Obama) to do? Why, quadruple the spending, what else!

Perhaps the disaster of Obama will eventually serve as a warning for Canadians not to take that next leftward leap. Or maybe the draw of Trudeau the Next Generation will be irresistible.

The leftward creap of the political axis has been so pervasive, does anyone know what a conservative looks like anymore?

Posted by: John Chittick | 2009-05-27 10:31:43 AM

We all know what the Liebral/NDP/Green approach to the financial crisis will be: rob Alberta blind. Expect a second NEP, and having to prepare to secede as the only effective means to defend our basic human rights against the fascists. Submission means being forced to accept chronic poverty, racial segregation, and the CBC. Never. Again.

Posted by: Zebulon Pike | 2009-05-27 11:40:56 AM

John, I took great pleasure in my response to a "Conservative" party fund raiser on the phone the other day. I told him that "Until you people become conservatives again you will get no money and no vote from me, and sinse that probably won't happen in my lifetime take me off your list". He said thank you and hung up. :)

Posted by: JC | 2009-05-27 12:45:48 PM

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