Jim Flaherty puts in an appearance
Government economic policy in general and the upcoming federal budget in particular have the subject of extremely negative expert commentary lately and, as if in response, Finance Minister Jim Flaherty (at left) has contributed a column to today’s National Post. Maybe he hoped to counter penetrating criticism from business columnists and economists.
If so, he failed. He said nothing substantive or reassuring—unless he thinks “we’ve talked to scads of folks” and “the Canadian economy hasn’t tanked as badly as the American” are comforting. (Those are my paraphrases, not direct quotes.)
On top of that, Flaherty’s timing is most unfortunate: His column appears just after Colby Cosh discovered that the Parliamentary Budget Office (PBO) apparently thinks government economic “stimulus” will have no effect.
The PBO notes that its projections, in both the “normal” and “low” illustrative scenarios, do not include any short-term positive effects on GDP from the “stimulus” to be announced next week. It would be a little unfair to give the government credit for macroeconomic stimulus when the costs aren’t counted against it in the budget projections. But the real reason the stimulus effects are left out is because the PBO doesn’t expect any such positive effects to exist — and in this case, the office agrees with the private sector judgment. “Our review of the underlying forecasts,” they note, “suggests that anticipated fiscal measures … are not significantly impacting their economic outlooks.”
In other words, the professional consensus of the best economic minds is that the stimulus probably isn’t going to stimulate a damn thing.
Also today, another expert commentator, John Williamson, urges Flaherty not to ratchet government spending in the next budget. Far better, he argues, to rely on tax cuts and business incentives to strengthen the economy.