Thinking About Stimulus in the US

A lot of US progressives, including Dean Baker, and Larry Mishel from the Economic Policy Institute, are weighing in on the need for a significant fiscal stimulus package, in the range of 1% of GDP. http://www.epi.org/subjectpages/stimulus.cfm Citing – entirely reasonably – the need for measures which will have a quick impact on a slowing economy, these packages tilt to income […]

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Whither the automatic stabilizers?

Given the storm clouds on the horizon, and the prospect of a slowdown/recession, one of the more interesting aspects of fiscal policy has to do with automatic stabilizers. As the economy turns, revenues will fall and expenditures on income support will naturally increase, driving the budget towards deficit and thereby propping up demand just as it is needed. The question […]

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Recession watch

With the recent turmoil in the markets, and the words “slowdown” and “recession” all over the news, the biggest danger is that it becomes a self-fulfilling prophesy. Consumers slow spending based on concerns about what comes next, and businesses put the brakes on new investments based on perceived soft demand. This could drive the economy into recession, and given the […]

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Flaherty’s stimulus spin

Here is a challenge for you: find me a quote from Jim Flaherty during or just after the release of the October Economic and Fiscal Update where he says the tax cuts in the EFU were a stimulus package because of worries about an economic slowdown in Canada. I’d love to see that because here is the latest spin: Federal […]

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The D Word

My Alternative Federal Budget technical paper from last week seems to have single-handedly re-inserted the word “deficit” into Ottawa’s policy lexicon after a decade’s absence. A couple good columns have come out repeating the main premise of my paper (see Thomas Walkom in the Toronto Star and Frances Russell in the Winnipeg Free Press). And every story that raises the […]

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Flaherty responds to Marc’s report

The Finance Minister denies my charges that a slowdown could lead to a deficit, as reported on CBC: Flaherty rejects think-tank’s deficit warning Last Updated: Monday, January 14, 2008 | 2:50 PM ET Finance Minister Jim Flaherty said Monday that there’s no substance to worries that the country will head back into a deficit situation if the economy slows. Flaherty was responding to a […]

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Canadian fiscal policy in the event of a downturn

With each passing day, more and more commentators are concerned about an economic slowdown. South of the border, the talk is even more pessimistic with the consensus essentially that the US economy is headed for recession in 2008, if not already in one. The Center for Budget and Policy Priorities and Brookings have each released papers on principles for fiscal […]

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A Primer on Pump-Priming

With a weakening US economy that may well spill over into Canada, it is time to start thinking about fiscal policy responses should recession rear its ugly head. To date much of the focus has been on monetary policy, with calls for central banks to lower interest rates. This is providing some relief, but as many economists have pointed out, […]

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The Australian Election: A Hollow Victory?

Although my knowledge of Australia’s politics is limited, they always interest me. Not only is the country similar to Canada in many ways, but it also had among the most successful labour movements and Labor Parties in the English-speaking world. (The party changed its name from “Labour” to “Labor” in 1912, when it seemed that Australia would adopt American spelling.) […]

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Saskatchewan’s Incredible Shrinking Government

During the sixteen years that the NDP governed Saskatchewan, provincial expenditures fell from just over 30% to just over 20% of Gross Domestic Product (GDP). This accomplishment is dubious for a political party committed to using government as a vehicle to redistribute wealth and finance important public programs. Why did the proportion of Saskatchewan’s economy available for these purposes decline […]

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How Much Will the Tax Cuts Cost?

As Andrew, Bruce, Marc, Ish and others have correctly argued, last week’s Economic Statement wastes money that could otherwise have financed vital public programs. Two tables in the Statement are critical to this case. Table 2.2 (page 45) estimates the costs of newly-announced tax cuts. Table 3.1 (page 73) estimates the costs of all tax cuts adopted since the Conservatives came to power. The […]

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Marc’s Notes on the Economic and Fiscal Update

The surprise Economic and Fiscal Update delivered today demonstrates how politically clever the Harper government is, and at the same time, how out of touch they are. At a time when there are major challenges facing the country, this update, as predicted, squanders the opportunity. Tax cuts will not build any affordable housing, they will not reduce poverty, they will […]

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More on the Myth of Big Government – Canada vs US

Erin’s recent post http://www.progressive-economics.ca/2007/09/12/government-size-canada-us/ prompted me to read Ferris and Winer’s interesting piece on the size of government in Canada and the US. The underlying data for the article have been usefully posted by the authors at http://http-server.carleton.ca/~winers/ (You’ll have to find the spread sheet posted at that site under author’s papers, and then look at the sheet for functional […]

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2007 Economic Outlook and Policy Forum

I have just returned from the annual conference of the Canadian Association for Business Economics in Kingston. On Monday evening, we heard from Pierre Duguay, a Deputy Governor of the Bank of Canada. Without specifically mentioning Jim’s Globe column, he suggested that some people mistook the Bank’s intervention in financial markets as a deviation from monetary policy’s exclusive focus on […]

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The Dangerous Shortage of Government Bonds

Here’s an interesting sidebar to the current hissy fit roiling financial markets:  It has turned out that Canada’s public debt is now dangerously low. Huh? We all know that where debt is concerned, private is good and public is bad.  That’s why we cheer on consumers as they pump up their indebtedness to a record ratio (over 100%) of disposable income, […]

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BC’s massive surplus and deteriorating credibility

The spirit of Paul Martin’s budgeting practices lives on at the BC Ministry of Finance. Today, Finance Minister Carole Taylor published the audited public accounts for 2006/07, with a jaw-dropping $4.1 billion surplus, the largest in provincial history. To put this in context, BC’s estimated GDP in 2006 was $179 billion, so the surplus amounts to 2.2% of GDP. Back […]

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Surpluses. Then what?

  The Globe and Mail ran an editorial last Friday (now subscriber only content)  Their summary reads:  “We have grown used to the notion that our governments can run up budget surpluses. If only they could show some vision for putting the money to work.Statistics Canada reported yesterday that all levels of Canadian government posted a combined surplus of $29-billion […]

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Dion: Right, Left & Centre

Over the last little while, some of my compadres here at Relentlessly Progressive Economics have intuited and sometimes even insisted that while Stéphane Dion’s socially liberal bona fides are not in question, his economic policy proposals place him well to the right of centre. Well, now we have proof from none other than Mr. Dion himself. Witness (see below), for […]

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Up With Corporate Taxes

Progressives often present corporate-tax cuts as having transferred billions of dollars from the Canadian government to big business. This characterization is largely correct, but neglects the fact that many foreign-based corporations operating in Canada are also taxed on a worldwide basis by foreign governments. To the extent that corporations in Canada are affiliates of American and Japanese multinationals, Canadian corporate-tax […]

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The Vehicle Efficiency Incentive

I’ve posted below an interesting commentary from Dennis DesRosier in favour of gas tax increases as an alternative to the proposed incentive increases. His chart shows a near perfect correlation between monthly gas prices and % monthly auto sales going to entry level ( fuel efficient) vehicles. It strikes me that – to reduce the emissions intensity of motor vehicles […]

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Budget 2007

Overview Budget 2007 erodes the federal government’s capacity to improve the lives of working people. Tax cuts will benefit profitable corporations without increasing investment in the Canadian economy. The federal government will continue subsidizing oil-sands extraction for nearly a decade. Increased transfers to provincial governments may serve important public purposes, but the Budget’s general thrust is to reduce the proportion […]

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The High Cost of Low Corporate Taxes

Monday’s federal budget will certainly reaffirm the corporate-tax reductions already scheduled through 2011 and may announce further reductions. Between 2001 and 2004, the federal government reduced its corporate-income-tax rate from 28% to 21% and began phasing out its corporate-capital tax.  It has committed to eliminate the corporate surtax and reduce the corporate-income-tax rate to 18.5% between 2008 and 2011. These latter reductions […]

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Liberal Tory Same Old Story

Former Conservative Garth Turner’s decision to join the Liberal caucus is one of several recent news items that highlight the extensive similarity between these two parties on economic policy. 1.) In response to the Conservative proposal to require that all interest savings from debt repayment be devoted to tax cuts, the former Liberal Finance Minister says, “The fact of the […]

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Canada’s Incredible Shrinking Government

I recently had occasion to re-read Jim Stanford’s contribution to an excellent CCPA book on Paul Martin’s Record (Hell and High Water), in which Jim pointed out that fiscal retrenchment in Canada under the Chretien government had been far, far more severe than the OECD norm. Few Canadians seem to perceive just how exceptional Canada has been compared to the […]

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The “net debt” sleight-of-hand

The Vancouver Sun’s Harvey Enchin comments on Finance Minister Jim Flaherty’s net debt elimination plan, pointing out some nuances in changed accounting practice around the concept of “net debt”:   When Finance Minister Jim Flaherty vowed to wipe out Canada’s net debt by 2021, many people heard something else. They thought he had made a pledge to pay off the […]

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