Wednesday, May 31, 2023
No Result
View All Result
  • Media
Support Us
Macdonald-Laurier Institute
  • Home
  • About
    • Who We Are
    • Who Makes MLI Work
    • Tenth Anniversary
  • Experts
    • Experts Directory
    • In Memoriam
  • Issues
    • Domestic Policy Program
      • Agriculture and Agri-Food
      • Canada’s Political Tradition
      • Economic policy
      • Health Care
      • Innovation
      • Justice
      • Social issues
      • Telecoms
    • Energy Policy Program
      • Energy
      • Environment
    • Foreign Policy Program
      • Foreign Affairs
      • National Defence
      • National Security
    • Indigenous Affairs Program
  • Projects
    • The Great Energy Crisis
    • Centre for Advancing Canada’s Interests Abroad
    • Dragon at the Door
    • The Eavesdropping Dragon: Huawei
    • Canada and the Indo-Pacific Initiative
    • The Transatlantic Program
    • DisInfoWatch.org
    • An Intellectual Property Strategy for Canada
    • Competition Policy in Canada
    • Speak for Ourselves
    • Justice Report Card
    • COVID Misery Index
      • Provincial COVID Misery Index
      • Beyond Lockdown
      • COVID and after: A mandate for recovery
    • Indigenous Prosperity at a Crossroads
      • Aboriginal Canada and Natural Resources
    • Past Projects
      • Talkin’ in the Free World with Mariam Memarsadeghi
      • 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
      • Straight Talk
      • Labour Market Report
      • Leading Economic Indicator
  • Events
    • Upcoming Events
    • Past Events
      • MLI Dinners
      • Great Canadian Debates
  • Latest News
  • Libraries
    • Inside Policy Magazine
      • Inside Policy Online
      • Inside Policy Back Issues
    • Papers
    • Commentary
    • Columns
    • Books
    • Video
    • Podcasts
  • Home
  • About
    • Who We Are
    • Who Makes MLI Work
    • Tenth Anniversary
  • Experts
    • Experts Directory
    • In Memoriam
  • Issues
    • Domestic Policy Program
      • Agriculture and Agri-Food
      • Canada’s Political Tradition
      • Economic policy
      • Health Care
      • Innovation
      • Justice
      • Social issues
      • Telecoms
    • Energy Policy Program
      • Energy
      • Environment
    • Foreign Policy Program
      • Foreign Affairs
      • National Defence
      • National Security
    • Indigenous Affairs Program
  • Projects
    • The Great Energy Crisis
    • Centre for Advancing Canada’s Interests Abroad
    • Dragon at the Door
    • The Eavesdropping Dragon: Huawei
    • Canada and the Indo-Pacific Initiative
    • The Transatlantic Program
    • DisInfoWatch.org
    • An Intellectual Property Strategy for Canada
    • Competition Policy in Canada
    • Speak for Ourselves
    • Justice Report Card
    • COVID Misery Index
      • Provincial COVID Misery Index
      • Beyond Lockdown
      • COVID and after: A mandate for recovery
    • Indigenous Prosperity at a Crossroads
      • Aboriginal Canada and Natural Resources
    • Past Projects
      • Talkin’ in the Free World with Mariam Memarsadeghi
      • 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
      • Straight Talk
      • Labour Market Report
      • Leading Economic Indicator
  • Events
    • Upcoming Events
    • Past Events
      • MLI Dinners
      • Great Canadian Debates
  • Latest News
  • Libraries
    • Inside Policy Magazine
      • Inside Policy Online
      • Inside Policy Back Issues
    • Papers
    • Commentary
    • Columns
    • Books
    • Video
    • Podcasts
No Result
View All Result
Macdonald-Laurier Institute

Going another round with the stimulators on the virtue of balanced budgets: Brian Lee Crowley in the Globe

November 27, 2015
in Columns, In the Media, Latest News
Reading Time: 4 mins read
A A

Brian Lee CrowleyStill not convinced of the virtue of balanced budgets?

Brian Lee Crowley, after enduring the enmity of stimulators following his most recent Globe and Mail column, offers up yet more reasons why running deficits is a bad idea.

The Globe ran an edited version of this column.

By Brian Lee Crowley, Nov. 27, 2015

In my last column I had the temerity to suggest that Canada’s interests were not well served by the Trudeau government’s commitment to running deficits, thus breaking a decades-long consensus among the parties on the virtues of balanced budgets outside times of economic crisis. Further I noted that the Liberals, led by then Finance Minister Paul Martin, discovered that budget discipline actually had a stimulative effect on the economy.

This earned me the undying enmity of a number of commenters on the Globe’s web page. They dismissed the relevance of the Martin era. Times were different then, they said. Canada is still in a recession, the sky is falling; stimulative federal deficits now are the correct prescription for our changed circumstances.

Assertion is not proof, however. Even if circumstances today are not identical to those when Mr Martin balanced the budget 20 years ago (circumstances are of course never identical), that in itself does not establish that the success of budget discipline and the failure of the preceding decades of federal deficits are irrelevant today. In honour of my critics’ ire, however, here are several more recent reasons why deficits do not commend themselves to me.

Too little attention has been paid, for example, to the fact that several provinces have been test driving the federal Liberals’ policy of allegedly stimulative budgets. Take Ontario for example.

That province has now run 8 deficits in a row, many of them of the same order of magnitude as the proposed federal deficit-funded stimulus. Queen’s Park has added over $140 billion in new debt to the province’s balance sheet. Yet Ontario’s economic performance remains sub-par and it continues to receive equalization transfers from Ottawa.

Here are several more recent reasons why deficits do not commend themselves to me.

In most years Ontario’s deficit is as large as the one Ottawa proposes to run for the entire country. Assuming that Ontario gets roughly the 36% percent of the federal spending that its population entitles it to, what evidence is there that another $3.6 billion will suddenly shake Ontario out of its alleged economic torpor?

In fact the stimulators’ argument is premised on the idea that Canada is underperforming relative to its potential, and that stimulus will remedy this. This underperformance, usually referred to by economists as the “output gap” is actually rather hard to measure with any great degree of confidence, but let’s take the estimate of the OECD, surely the most authoritative source of comparative economic data for the wealthy industrialized countries of the world.

Their data for 2015 say that Canada’s output gap is a rather modest one half of one percent of GDP (in 2009 it was nearly 4 percent) and that it is already closing. They project its disappearance by 2016, well before the effect of any federal stimulus would be felt. Moreover they express concern that Canada’s accelerating growth over the next couple of years will trigger inflation and therefore interest rate rises. The OECD doesn’t say so but such interest rate rises will nullify much of any stimulus effect from Ottawa’s efforts.

This is an all-too plausible reading of the economy. If we measured unemployment correctly, as the Americans do, our unemployment rate would be a relatively low 6 percent and employment growth continues. If there was serious slack in Canadian labour markets, wage pressures would be lessening, but as Professor Stephen Gordon of Laval has recently argued, wages are rising, not stagnant or falling. Even the alleged youth employment “crisis” has been shown by Philip Cross, a senior fellow at my institute, to be vastly exaggerated. Moreover, many experts now argue that because of population ageing, among other factors, our relatively slow growth is the new normal and we can waste a lot of money in a deficit-financed swim against this tide. Think Japan.

I warned too in my last column that the deficit taps are easy to turn on but the devil’s own business to close. Again Ontario’s experience confirms this. The province’s deficits were supposed to be a short deviation from balanced budgets, yet each year the promised return to balance is pushed farther out.

This experience underlines yet again a truth the stimulators disregard at their peril: governments do not control revenues and rosy revenue projections are an attempt to balance future budgets, not through spending discipline, but on a wing and a prayer. The one thing governments truly control is their spending and Paul Martin showed that is the route to fiscal sustainability. The left, always quick to decry the idea that tax cuts pay for themselves through higher revenue, engage in their own wishful thinking that they can boost revenues by borrowing to “stimulate” the economy and therefore make the deficit self-financing.  The evidence is not on their side.

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: balanced budgetsBrian Lee Crowleystimulus
Previous Post

Curing the public sector’s sick leave malaise: MLI report by Philip Cross

Next Post

Infographic: Totaling up the civil service’s leave

Related Posts

Taiwan is at the ‘top of the agenda’ for Biden administration: Stephen Nagy on CNBC
Video

Taiwan is at the ‘top of the agenda’ for Biden administration: Stephen Nagy on CNBC

May 30, 2023
Tokyo and Seoul’s on alert as North Korea prepares to launch satellite: Stephen Nagy on ABC News
Video

Tokyo and Seoul’s on alert as North Korea prepares to launch satellite: Stephen Nagy on ABC News

May 30, 2023
To maintain western support, Ukraine must carefully manage its anti-Kremlin Russian allies: Matthew Bondy for Inside Policy
Inside Policy

To maintain western support, Ukraine must carefully manage its anti-Kremlin Russian allies: Matthew Bondy for Inside Policy

May 29, 2023
Next Post
Infographic: Totaling up the civil service’s leave

Infographic: Totaling up the civil service’s leave

Newsletter Signup

Follow us on

Macdonald-Laurier Institute

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

613.482.8327

info@macdonaldlaurier.ca
MLI directory

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
  • Annual Reports
  • Jobs
  • 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
  • Experts
    • Experts Directory
    • In Memoriam
  • Issues
    • Domestic Policy Program
      • Agriculture and Agri-Food
      • Canada’s Political Tradition
      • Economic policy
      • Health Care
      • Innovation
      • Justice
      • Social issues
      • Telecoms
    • Energy Policy Program
      • Energy
      • Environment
    • Foreign Policy Program
      • Foreign Affairs
      • National Defence
      • National Security
    • Indigenous Affairs Program
  • Projects
    • The Great Energy Crisis
    • Centre for Advancing Canada’s Interests Abroad
    • Dragon at the Door
    • The Eavesdropping Dragon: Huawei
    • Canada and the Indo-Pacific Initiative
    • The Transatlantic Program
    • DisInfoWatch.org
    • An Intellectual Property Strategy for Canada
    • Competition Policy in Canada
    • Speak for Ourselves
    • Justice Report Card
    • COVID Misery Index
      • Provincial COVID Misery Index
      • Beyond Lockdown
      • COVID and after: A mandate for recovery
    • Indigenous Prosperity at a Crossroads
      • Aboriginal Canada and Natural Resources
    • Past Projects
      • Talkin’ in the Free World with Mariam Memarsadeghi
      • 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
      • Straight Talk
      • Labour Market Report
      • Leading Economic Indicator
  • Events
    • Upcoming Events
    • Past Events
      • MLI Dinners
      • Great Canadian Debates
  • Latest News
  • Libraries
    • Inside Policy Magazine
      • Inside Policy Online
      • Inside Policy Back Issues
    • Papers
    • Commentary
    • Columns
    • Books
    • Video
    • Podcasts

© 2021 Macdonald-Laurier Institute. All Rights reserved.