Thursday, February 2, 2023
No Result
View All Result
  • Media
Support Us
Macdonald-Laurier Institute
  • Home
  • About
    • Who We Are
    • Who Makes MLI Work
    • Tenth Anniversary
    • Jobs
  • Experts
    • Experts Directory
    • In Memoriam
  • Issues
    • Domestic Policy Program
      • Agriculture and Agri-Food
      • Canada’s Political Tradition
      • Economic policy
      • Energy
      • Health Care
      • Innovation
      • Justice
      • Social issues
      • Telecoms
    • Foreign Policy Program
      • Foreign Affairs
      • National Defence
      • National Security
    • Indigenous Affairs Program
  • Projects
    • COVID and after: A mandate for recovery
    • COVID Misery Index
      • Beyond Lockdown
    • Provincial COVID Misery Index
    • Centre for Advancing Canada’s Interests Abroad
      • Dragon at the Door
      • The Eavesdropping Dragon: Huawei
    • An Intellectual Property Strategy for Canada
    • Speak for Ourselves
    • Canada and the Indo-Pacific Initiative
    • DisInfoWatch.org
    • The Transatlantic Program
    • Indigenous Prosperity at a Crossroads
      • Aboriginal Canada and Natural Resources
    • Talkin’ in the Free World with Mariam Memarsadeghi
    • Past Projects
      • Justice Report Card
      • Munk Senior Fellows
      • A Mandate for Canada
      • Confederation Series
      • Fiscal Reform
      • The Canadian Century project
      • Fixing Canadian health care
      • Internal trade
      • From a mandate for change
      • Size of government in Canada
  • Events
    • Upcoming Events
    • Past Events
      • MLI Dinners
      • Great Canadian Debates
  • Latest News
  • Libraries
    • Inside Policy Magazine
      • Inside Policy Back Issues
      • Inside Policy Blog
    • Papers
    • Columns
    • Books
    • Commentary
    • Straight Talk
    • Video
    • Multimedia
    • Podcasts
    • Leading Economic Indicator
    • Labour Market Report
    • MLI in the Media
  • Home
  • About
    • Who We Are
    • Who Makes MLI Work
    • Tenth Anniversary
    • Jobs
  • Experts
    • Experts Directory
    • In Memoriam
  • Issues
    • Domestic Policy Program
      • Agriculture and Agri-Food
      • Canada’s Political Tradition
      • Economic policy
      • Energy
      • Health Care
      • Innovation
      • Justice
      • Social issues
      • Telecoms
    • Foreign Policy Program
      • Foreign Affairs
      • National Defence
      • National Security
    • Indigenous Affairs Program
  • Projects
    • COVID and after: A mandate for recovery
    • COVID Misery Index
      • Beyond Lockdown
    • Provincial COVID Misery Index
    • Centre for Advancing Canada’s Interests Abroad
      • Dragon at the Door
      • The Eavesdropping Dragon: Huawei
    • An Intellectual Property Strategy for Canada
    • Speak for Ourselves
    • Canada and the Indo-Pacific Initiative
    • DisInfoWatch.org
    • The Transatlantic Program
    • Indigenous Prosperity at a Crossroads
      • Aboriginal Canada and Natural Resources
    • Talkin’ in the Free World with Mariam Memarsadeghi
    • Past Projects
      • Justice Report Card
      • Munk Senior Fellows
      • A Mandate for Canada
      • Confederation Series
      • Fiscal Reform
      • The Canadian Century project
      • Fixing Canadian health care
      • Internal trade
      • From a mandate for change
      • Size of government in Canada
  • Events
    • Upcoming Events
    • Past Events
      • MLI Dinners
      • Great Canadian Debates
  • Latest News
  • Libraries
    • Inside Policy Magazine
      • Inside Policy Back Issues
      • Inside Policy Blog
    • Papers
    • Columns
    • Books
    • Commentary
    • Straight Talk
    • Video
    • Multimedia
    • Podcasts
    • Leading Economic Indicator
    • Labour Market Report
    • MLI in the Media
No Result
View All Result
Macdonald-Laurier Institute

Not all stimulus is created equal: Brian Lee Crowley in the Globe

September 17, 2015
in Columns, Domestic Policy Program, Economic policy, In the Media, Latest News
Reading Time: 4 mins read
A A

Brian Lee CrowleyLooking to stimulate the economy? Then look beyond the “borrow and spend” stimulus formula that so many party leaders are parroting on the campaign trail in election 2015.

Brian Lee Crowley writes in the Globe and Mail that there are more effective ways to remove the obstacles that stand in the way of economic growth.

By Brian Lee Crowley, Sept. 18, 2015

As I listen to the party leaders debate “stimulus” in the current election campaign it occurs to me that the word’s very meaning has become strangely truncated, a mere shadow of its true rich self. The Shakespearean formula applies: A stimulus by any other name would smell as sweet.

Our politicians seem to believe that stimulus can only mean government borrowing money to spend directly on public sector projects in an effort to prop up flagging consumer demand. Thus to “stimulate” more economic activity government should spend more on “infrastructure” or social services (e.g. childcare). The money thus spent then gets spent again by its beneficiaries and a virtuous circle is created that puts the economy on a sustainable growth path. Or that’s the theory.

There are a number of problems with this theory, especially right now. First, there are lots of reasons to think that the economy is growing, meaning stimulus is misplaced. One of the most reassuring signs was the announcement that Ottawa balanced its budget a year ahead of schedule. Because government revenues are highly sensitive to growth (or its absence), higher than expected revenues are a concrete sign of an economy headed in the right direction. Ditto for our better than expected economic growth in June, and our unemployment rate around 7 percent. We’d all like it to be lower, but this is modest unemployment at best. If we measured unemployment the way the Americans do, it would be a full percentage point lower.

But back to the bewildering variety of stimuli. For example, instead of government borrowing the money and deciding how to spend it, an alternative is to cut taxes. One reason to prefer this is that governments get captured by politics and end up spending “infrastructure” money wastefully (gazebos in cabinet minister’s ridings and endless hockey rinks come to mind), not to mention the fact that projects are often chosen on the wholly arbitrary basis that the plans for Project X happen to be ready to go, whereas Project Y isn’t ready. Tax cuts, by contrast, empower individuals and companies to decide what spending would be most valuable to them. And since it’s their money rather than someone else’s, they tend to spend it prudently rather than for flashy political benefit.

The left decries tax cuts as “trickle down economics” forgetting that it was a signature policy of one of their darlings, US President John F. Kennedy. More recently Sweden broke with the developed-country consensus during the last recession and devoted most of their stimulus package to tax cuts rather than government-directed public works. The great and good duly warned that this policy would be a disastrous failure. It was the critics, not the government, who had to feast on crow as Sweden outperformed virtually all its peers.

Tax cuts aren’t the only alternative to infrastructure or social services of course. For example the fall in the loonie relative to the US greenback has a stimulative effect on our huge export sector, which is beginning to show up in recent trade figures.

Then there is the fall in oil prices. What has devastated the Alberta economy has put more cash directly in the pocket of every consumer in the country, as the price of gasoline at the pump, for example is roughly a third lower than it was a scant few months ago.

Then there are low interest rates. Falling mortgage and loan rates are again leaving more money in consumers’ pockets to spend on what they will.

In fact when you add it all up –low interest rates, cheap gasoline, a falling federal tax burden and continued high government spending (Ottawa has never spent more than it is spending today)—it is hard to see the case for yet more stimulus.

If we are unhappy (as we should be) with today’s sluggish growth, a better question might be how can we remove obstacles to growth in the economy. Here there is a lot to choose from.

We should continue aggressively to pursue access to foreign markets through free trade agreements, including the EU and the Trans-Pacific Partnership.  The inexcusable barriers to trade that separate Canadians should be banned. Both taxes and social programmes should be reformed to better reward work and investment while discouraging dependence. The entry of new well-capitalised competitors in sectors like banking, telecoms and air travel and new technologies that lower costs for consumers (Uber anyone?) should be embraced. The path should be smoothed for productivity-enhancing investments like new pipelines that could literally add hundreds of billions of dollars to GDP. Finally reconciliation with Aboriginal people would greatly improve the prospects for investment on the natural resource frontier.

Every party can find something to embrace on this list. And they’d be getting stimulus without the tears.

Brian Lee Crowley (twitter.com/brianleecrowley) is the Managing Director of the Macdonald-Laurier Institute, an independent non-partisan public policy think tank in Ottawa: www.macdonaldlaurier.ca.

Tags: Brian Lee CrowleyeconomyElection 2015stimulus
Previous Post

Canadian economy the clear winner from budget surplus, Crowley tells CTV

Next Post

Nominate MLI for the 2015 Go To Think Tank rankings

Related Posts

Building the Free and Open Indo-Pacific with like-minded partners: A view from Japan – Akiko Fukushima for Inside Policy
Inside Policy

Building the Free and Open Indo-Pacific with like-minded partners: A view from Japan – Akiko Fukushima for Inside Policy

January 31, 2023
How pipelines went from villain to hero in Indigenous reconciliation: Heather Exner-Pirot in the Calgary Herald
Columns

Alberta must assert itself over oil and gas against unilateral emissions cuts: Jack Mintz and Janice MacKinnon in the National Post

January 30, 2023
Henry Dundas was an abolitionist. He deserves a street named after him: Patrice Dutil in the National Post
Columns

Henry Dundas was an abolitionist. He deserves a street named after him: Patrice Dutil in the National Post

January 30, 2023
Next Post
MLI Report: Delays, lack of capacity lead to historic levels of unspent defence funding

Nominate MLI for the 2015 Go To Think Tank rankings

Macdonald-Laurier Institute

323 Chapel Street, Suite #300
Ottawa, Ontario
K1N 7Z2 Canada

613.482.8327

info@macdonaldlaurier.ca
MLI directory

Follow us on

Newsletter Signup

First Name
Last Name
Email Address

Support Us

Support the Macdonald-Laurier Institute to help ensure that Canada is one of the best governed countries in the world. Click below to learn more or become a sponsor.

Support Us

Inside Policy Magazine

  • Current Issue
  • Back Issues
  • Advertising
  • Inside Policy Blog
  • Privacy Policy

© 2021 Macdonald-Laurier Institute. All Rights reserved.

No Result
View All Result
  • Home
  • About
    • Who We Are
    • Who Makes MLI Work
    • Tenth Anniversary
    • Jobs
  • Experts
    • Experts Directory
    • In Memoriam
  • Issues
    • Domestic Policy Program
      • Agriculture and Agri-Food
      • Canada’s Political Tradition
      • Economic policy
      • Energy
      • Health Care
      • Innovation
      • Justice
      • Social issues
      • Telecoms
    • Foreign Policy Program
      • Foreign Affairs
      • National Defence
      • National Security
    • Indigenous Affairs Program
  • Projects
    • COVID and after: A mandate for recovery
    • COVID Misery Index
      • Beyond Lockdown
    • Provincial COVID Misery Index
    • Centre for Advancing Canada’s Interests Abroad
      • Dragon at the Door
      • The Eavesdropping Dragon: Huawei
    • An Intellectual Property Strategy for Canada
    • Speak for Ourselves
    • Canada and the Indo-Pacific Initiative
    • DisInfoWatch.org
    • The Transatlantic Program
    • Indigenous Prosperity at a Crossroads
      • Aboriginal Canada and Natural Resources
    • Talkin’ in the Free World with Mariam Memarsadeghi
    • Past Projects
      • Justice Report Card
      • Munk Senior Fellows
      • A Mandate for Canada
      • Confederation Series
      • Fiscal Reform
      • The Canadian Century project
      • Fixing Canadian health care
      • Internal trade
      • From a mandate for change
      • Size of government in Canada
  • Events
    • Upcoming Events
    • Past Events
      • MLI Dinners
      • Great Canadian Debates
  • Latest News
  • Libraries
    • Inside Policy Magazine
      • Inside Policy Back Issues
      • Inside Policy Blog
    • Papers
    • Columns
    • Books
    • Commentary
    • Straight Talk
    • Video
    • Multimedia
    • Podcasts
    • Leading Economic Indicator
    • Labour Market Report
    • MLI in the Media

© 2021 Macdonald-Laurier Institute. All Rights reserved.

IDEAS CHANGE THE WORLD!Have the latest Canadian thought leadership delivered straight to your inbox.
First Name
Last Name
Email address

No thanks, I’m not interested.