A hat tip from Maclean’s
A year after crunching the numbers and coming to the conclusion that an economic downturn spelled deficits, I got this hat tip in Maclean’s:
Itâ€™s true that there was no consensus forecast, through most of last year, that saw Canada suffering a deep recession in 2009, and a return to staggering deficits in Ottawa. However, itâ€™s false to suggest that danger signals were utterly absent from reputable projections last year.
In fact, the Prime Minister himself (as he boasts when it suits his purposes) explicitly warned of rough economic days ahead in his year-end interviews in the final days of 2007, so much so that we headlined our take on his message â€œNot-so-happy New Year.â€
The following month, Marc Lee of the left-leaning Centre for Policy Alternatives became the first economist I know of to explicitly flag the strong possibility of a return to deficits, in a CCPA report that didnâ€™t get the attention it deserved at the time.
Thanks for the credit. Admittedly, what I did at the time was pretty straightforward, and I was surprised that our Finance Minister was so dismissive in response.
One commenter on the blog post put it, I am not a “Taleb-style prophetic genius … didnâ€™t predict the severity of the downturn, but … did raise a legitimate red flag that the government should prepare itself for the possibility of a less rosy economic forecast.” True enough. I was concerned enough about the state of the housing bubble to build that into my budget projections. The economy did better through the first half of 2008 than I expected, and crashed harder than I expected in the second half. And I did not predict the collapse of stock markets and commodity prices, nor the massive financial crisis, though I was reading Roubini and Krugman and others who did have an inkling.