Half-Hearted Stimulus

We may all be Keynesians now in terms of the public discourse,   but governments  are mainly posturing rather than delivering.  That strikes me as a fair summary of a technical and rather dismal discussion of fiscal stimulus packages by the OECD (Chapter 3 of the Interim Economic Outlook relased just before the London G20 Summit.)

http://www.oecd.org/document/59/0,3343,en_2649_33733_42234619_1_1_1_1,00.html

The OECD calculate that the average GDP impact of fiscal stimulus packages in member countries will be just 0.5% of GDP in each of 2009 and 2010 – because few governemnts have announced very large packages, and because the ones that have been announced   tilt heavily towards tax cuts which have small multiplier effects (and indeed go more to saving than spending. )  That GDP impact is, to say the least, modest given huge output gaps opening up across the OECD area.

The Canadian package is reckoned to be one of the largest at 4.1% of GDP over two years, but it amounts to only 1.7% of GDP over two years in terms of spending (vs 2.4% in the US and 3.3% in Australia.) Canada’s package is judged to be heavily tilted towards relatively ineffective tax cuts (2.4% of GDP) , and Canada is judged to be one of those countries which could have done much more  (a fairly stringent  judgment given strong OECD aversion to opening up structural deficits.)

From a progressive perspective, only social democratic Australia seems to have come close to doing what we have called for — significant stimulus tilted strongly towards public investment – and they seem set to have one of the mildest recessions in the OECD area.

2 comments

  • Just following up on your post Andrew.

    Half hearted stimulus is actually being generous. When you consider the amount of stimulus being crafted south of the border, I would say one quarter may actually be more accurate.

    This on the face of Geitner’s speech yesterday where he posited one of the planks in the recovery plan of the USA is recovery in global demand from stimulus by other governments which in turn would help the US. Being the biggest trading partner with the USA, it begs a critically loud voice that we as Canadians are free riding on the coat tails of the American Stimulus.

    Harper’s plan is but patchwork, with no focus, no leadership, and is litle help for those facing the hardship, (unless you own a bank that is).

    Potentially it is Harper’s thoughts that we really are not as bad off as the rest of the globe.

    Potentially it is the statistics we are reading, as agin Statcan has come forth with another report that is nothing but cheer leading.

    Todays Retail sales were released, and again Statcan focuses on some notion that we are turning around as retail sales have increased a a whole .2%.

    And again they fail to mention that in fact sales are down a whopping 22% from a year ago.

    Just look at how the media reports such a story,

    http://www.cbc.ca/money/story/2009/04/23/retail-sales-february.html

    Seems awfully rosy doesn’t it. Never once is it mentioned that we are sitting at the bottom of a deep pit that is 22% lower then we were last year. That is like the grand canyon in the retail sales industry, yet Mr Munir A. Sheikh seems to have given the push for statistics that help position his friend Mr Harper a little higher up in the polls.

    Fact: Mr Sheikh was once a whipping boy for a certain Mr. Tom D’Áquino, so you can be reassurred that his lunches sure the hell don’t include a guy like Kenny G at the CLC.

    The more this new Chief Statistician shows his colours the more I realize how seriously Harper and his reform party have no notion of how to run a government. You cannot, and must not place a person with such political bias within such a sensitive position. With a Statcan budget 200 plus million a year, it sure is an expansive way to practice and generate such propaganda.

    Sure there are plenty of nice reports and things Statcan generate, but it also has an ongoing interface within the daily lives that make up an important part of our political culture.

    It must strive, it must push, it must measure and report with the utmost respect for neutrality. This I am afraid is not currently the situation. It has become a pathetic mouth piece of a Harper regime that has no respect for governance and due process.

    saul T.

  • that should read a 5.1 percent decline, in year over year sales which is huge

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