Fiscal Economics 101, for Jim Flaherty

How about this latest gem from our let-the-market-rule Finance Minister: Les Whittington Ottawa Bureau, TORONTO STAR (APRIL 10) OTTAWA–Finance Minister Jim Flaherty says the Conservatives will cut government spending if need be to avoid a budget deficit caused by the economic slowdown. “No deficit – balanced budget,” he said outside the Commons. “We’re not raising taxes,” Flaherty added when asked […]

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Some Inconvenient Accounting and the Fall 2008 Fiscal Update

Ah, the confluence of the events! The tabling of a “prudent” federal budget for uncertain times, followed a week later by news of slowing economic growth. Of course, rumors of the economy’s imminent decline may be greatly exaggerated, given January’s jobs report and trade data. But let’s carry forth with the economic accounts data.   Earlier, Erin and Toby drew […]

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Public infrastructure in Canada

A new release from Statistics Canada on infrastructure finds that: In the public sector, infrastructure is primarily concentrated in schools, hospitals, roads and water mains. In 2002, about one-third (34%) of assets were devoted to transportation in the public sector, unchanged from 1970. About 26% were devoted to recreation, culture and education, 13% to health and social protection and 11% […]

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Pity the Poor Capital Gains-Makers

I am glad that Jim Flaherty’s budget did not actually come through with a rumoured exemption for capital gains income.  Recall that the Conservatives’ 2006 platform had promised a ridiculous and unworkable exemption from income taxes on capital gains so long as the winnings were “re-invested.”  This high-profile broken promise still clearly niggled the Harper government, and expectations were high […]

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Marc’s budget commentary (revised)

Usually when expectations are lowered it is so that they can subsequently be exceeded. So budget watchers were all wondering in the past few days what the surprise in this budget would be. Alas, the surprise is that there is no surprise. As expected we got a do-nothing budget, albeit one with a glossy cover of a child waving a […]

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BC introduces a carbon tax!

Since the provincial Liberals came to power in 2001 I have seen a lot of BC Budgets and not been too happy with any of them. Until now. Today’s 2008 model is a very interesting budget, and while I have a number of quibbles, I support the overall direction. And as in the recent past on climate change I find […]

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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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