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The Progressive Economics Forum

How to defuse the crisis

This political crisis is completely the fault of the Prime Minister. Having laid the groundwork for a solid economic update last week – by saying in Lima that he had learned the lessons of the Great Depression and that he would not rule out deficits – what was tabled was a plan that did nothing to address concerns about the economy. Worse, that plan made a fetish out of balanced budgets by bringing in spending cuts, just the opposite of what was needed, plus an agenda of attacking funding for political parties, collective bargaining for the public service and pay equity that appeared nowhere in the election platform of the Tories just two months ago.

There is a way out for the Prime Minister that has not been mentioned in the countless media reports: deliver an economic stimulus package and make sure that it is part of the vote on Monday. The elements of that package are widely agreed upon, from my update for the CCPA last week to the big banks: infrastructure, shoring up income support and EI, and ensuring that we do not experience a wave of foreclosures. This will cost some money, and will take the budget into deficit. But that is what Canadians want, at least the two-thirds of Canadians who did not vote for the Tories want.

The PM must surely have learned by now that he cannot govern with a minority as if it were a majority. If not, it is time he is removed from power, either by the Two-Thirds Coalition or by his own party. This PR campaign of smearing a stimulus package as “socialist economics” is appalling. I guess this means every country in the world except Canada has gone socialist. And if he really believes that then proroguing until a budget in late-January will not change the fundamental equation that this is a mean-spirited government that will not lift a finger to help Canadians or do its part of an international effort to confront the crisis.

Enjoy and share:

Comments

Comment from Travis Fast
Time: December 3, 2008, 11:06 am

Plan or no stimulus plan the cons have to go.

They do not think there is a problem, if they did think there was a problem they would NOT agree on the form stimulus should take.

If they were to introduce a stimulus package that they thought would pacify the coalition they would simply bog down their own (cynical) plan in the committees and use every other tactic they could think of to distract, coerce and divide the opposition parties. This is the only agenda the Conservatives are capable of concentrating on and pursuing with rigor .

Moreover, it is not true that Canada is alone in resisting stimulus: Germany and Japan are doing the same along with Poland. The latter is not an effective shield but the former two are. And if the Cons are smart they will shift to using Japan and Germany as ideological cover.

For my money this crisis should only end when the conservatives are sent to the opposition side of the house and the Coalition introduces their stimulus package which will have the benefit of having the compromises already cooked-in before it goes to the committees.

Comment from Darwin O’Connor
Time: December 3, 2008, 11:06 am

Even if Harper did that, I don’t think it would be enough. The list of things the three opposition parties agree on and would want to do together is far longer then what the Conservatives could offer. Not just stimulus, but addressing climate change and Afghanistan I’m sure are on their list.

The only idea I’ve seen so far that could defuse this is James Bow’s idea that Harper resign as leader of the Conservatives and let someone else, like Jim Prentice, take over.

Comment from Marc Lee
Time: December 3, 2008, 11:43 am

About a month ago, Germany announced a stimulus package of about 2% of GDP. They are the most like Canada in terms of fiscal starting position (relatively small deficit as a share of GDP going into the crisis).

Japan has made some cautious moves but is starting from a very large deficit, and accumulated debt after fighting its own collapse in the 1990s.

I agree that it would be best for Harper to be ousted, and I say that in the most non-partisan way I can. But my point was that if he delivered something bold on the economy in the next couple days it could defuse the crisis and change the tenor of Monday’s confidence vote.

Comment from Travis Fast
Time: December 3, 2008, 12:27 pm

Marc,

Perhaps a compromise on Germany (which is where they are likely to end up). What you say is true but over the past week or so Merkel was busy pouring cold water on the idea talking like a fiscal hawk. This makes sense to some degree because the Germans rely on export growth so they like Canada are partly in a position to play beggar thy neighbor. But I think Germany will have to come fully on board to meet their broader liberal commitments to the EU. But my point was that Harper could pick-up on Merkel’s hawkish stance and use it to further delay, obfuscate, and delude.

On your point about being able to dull the crisis by introducing a real stimulus package I think the well has been poisoned and the village is convinced they should dig another well. I am not one who generally goes in for “trust” based policy prescriptions or analysis but in this case I think that is where we are.

The conservatives are bankrupt at this point, and no amount of pandering is going to restore what little good will there once was.

And I say all of this as someone with no party affiliations; very much on the outside; and as someone who is skeptical (given the present planning and delivery capacity of the state) of fiscal policy to ameliorate let alone resolve the crisis.

Comment from Leigh Thomson
Time: December 3, 2008, 1:16 pm

“Working with our International Partners

The new Government is committed to working with the international community, particularly with G-20 partners, in pursuit of an effective new global financial architecture.”
– from the policy accord under Marc’s ‘yes we can?’ post.
As with other aspects of the accord, obviously residents of the country will need to push in useful directions, and this would include working with the international community particularly in pursuit of an Effective New global financial architecture. on that front, on the trade front, on the price front, on the wage front, on the equity front, on the social program front, on the anti-poverty front, efforts are ongoing.

Comment from Lisa
Time: February 18, 2009, 1:03 am

We will never recover from a current crisis, if the economy system in whole would’t changed from capitalism to sosialism, then faster we will turn to a new regulatory system, then we will save a home land. We don’t need to wait until USA will give us a direction where to go and what to do. All natural recourses, oil, gas, banks, manufactures must be nationalized and need to be created a government regualtory price-control institutions, everything must be under a government control and governments properties. All markets must get out from the economy. Here is a small example, prices in Home Depot, Rona, WallMart, Canadian Tire or major foodsupermarkets, I mean big speculative monsters must be regulated under a price regulatory system, them prices ar’not realistic in terms of labor-hour plus transportation cost, someone must to start to calculate the end price of production.

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