The Shotgun Blog
Wednesday, December 17, 2008
Canada West Foundation provides political leaders with a Keynsian-lite economic stimulus strategy
The Calgary-based Canada West Foundation released a report today outlining its ideas for stimulating the economy.
The report contains the consolidated thinking of 25 leading western Canadian economic analysts who were asked what the Government of Canada should do to address the current economic slowdown. The resulting report, Taking Action on the Economy, is designed to ensure that western interests and perspectives are part of any national strategy to address Canada’s slowing economy.
While the views of the 25 economic analysts “varied considerably,” some consensus themes emerged:
• Monetary policy needs to be the first line of attack, and contributors support interest rate cuts and efforts to improve liquidity that have already been taken. This is in line with the general observation that the current slowdown is driven by factors outside Canada, over which domestic policy has no influence.
• An effective stimulus package should act quickly by working through automatic stabilizers (e.g. employment insurance) to strengthen the existing safety net and put money in the hands consumers. In the interests of speed, the package should rely primarily on enhancements to existing programs (e.g. tax cuts) rather than on the creation of new programs.
• Infrastructure spending should be directed first to ‘shovel ready’ projects identified by municipal governments, and then to projects designed to improve Canada’s long-term economic competitiveness and social well being.
• The stimulus package should be national in design rather than being designed for particular regions, sectors or firms; although participants reluctantly agree that the auto sector may require specific attention.
• To the extent possible, the stimulus package should be aligned with long-term policy objectives to enhance Canada¹s competitiveness, productivity and trade. In this sense, the current crisis is an opportunity to get things right for the long haul.
“Participants in the report were passionate in their opinions,” says Dr. Roger Gibbins, President and CEO of the Canada West Foundation and editor of the report.
Gibbins added that deficits should be tolerated as a necessary part of any economic stimulus strategy: “We accept the need for quick action on a national stimulus package, but stress that any short-term deficit should only be accepted so long as we don’t drive the economy over the cliff in the long run. We need to avoid structural deficits at all costs.”
Monetary stimulus, infrastructure spending, industry bailouts, economic diversification schemes – there is really nothing new here, or anything that will work, unless tax cuts, which were mentioned, are plucked out of this policy grab bag while the rest of the New Deal schemes are ignored.
The burden of big government and high taxes will eventually destroy even the most robust economy – and it is monetary meddling that has created the false wealth that is now evaporating.
Why does anyone believe more of the same will work?
Posted by Matthew Johnston
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"Why does anyone believe more of the same will work?"
They don't actually believe it. I refer you to the following:
"The report contains the consolidated thinking of 25 leading western Canadian economic analysts "
Who do you suppose signs their paycheques, Matthew? The interests of the taxpayer and the bank\academic\union\manufacturing\big oil economist are mutually exclusive. Metaphorically, the invisible hand always chooses to pull pud (short term instant gratification) rather than beckon a comely lass (long term optimal growth).
Keynes should have said 'In the long run, we'll all be retired - on fat public sector pensions and investment portfolios pumped up by unsustainable spending.'
Posted by: Veritas | 2008-12-17 2:36:50 PM
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