Truth from the Fraser Institute?
Yesterdayâ€™s Financial Post featured a rather strange op-ed by the Fraser Instituteâ€™s current and former directors of fiscal studies:
Most Canadians are unfortunately not aware of Canadaâ€™s 15-year track record of reducing the size of government (1992-2007). Since peaking in 1992, the size of government in Canada – best measured by total spending at all levels of government as a share of gross domestic product – has decreased from 53% to less than 40%, according to data from the Organization for Economic Cooperation and Development.
These figures are correct. Indeed, Andrew posted them on this blog more than two years ago (they did not change much from 2006 to 2007).
But the Fraser Institute in general, and the authors of this op-ed in particular, spent most of those 15 years railing against the allegedly increasing size of Canadian government. Are they now admitting that they were incorrect about what was happening to the size of government?
Fraser Institute types used to contend that public spending as a share of GDP was the wrong measure. They preferred public spending per capita adjusted for inflation, a measure almost guaranteed to show ever-expanding government over any extended period of time. Now, they agree that public spending is â€œbest measuredâ€ relative to GDP.
Why the change of tune? The authors are trying to promote an IMF study showing that countries which cut public spending more, relative to GDP,Â enjoyed better economic performance. One must ask which way the causation runs. Obviously, it was easier for governments to reduce spending more, relative to GDP, in countries where GDP was growing faster. Furthermore, the need to maintain or increase public spending would often have beenÂ strongest in countries with the weakest economies.
While emphasizing the comparison between countries that cut spending very deeply and countries that cut spending less, the op-ed ignores the fact that this period in which â€œmost industrialized countriesâ€ did cut spending led to a global economic meltdown. The argument seems to be that, if you stop the clock in 2007, free-market economics has a pretty good track record.
However, on the way to this bizarre conclusion, the Fraserites make a couple of other points that have previously appeared on this blog. They note, as I did a couple of months ago, that â€œgiven President Obamaâ€™s recent budget, Canada will likely have a smaller government than the United States within the next few years.â€
They also note that Roy Romanow slashed public spending as much (relative to inflation, not GDP) as Paul Martin and more than Mike Harris. I recently lamented Saskatchewanâ€™s incredible shrinking government (relative to GDP) under the last two NDP Premiers.