NDP’s “Balanced Budget” Platform
Jack Layton unveiled the NDP’s policy platform today.Â Among other things, it promises to eliminate the deficit (i.e. balance the federal budget) within four years.Â I’m not sure it should.
Several years back, I had the opportunity to take a directed reading course from John Smithin.Â In addition to being a long-time member of the Progressive Economics Forum, John is a York University Professor in both the Department ofÂ Economics and the Schulich School of Business.
One of the things I learned from Â John is that it is *not* important to balance the federalÂ budget.Â Rather, what’s important is that, over the long term, the size of Canada’s economy grow at a faster rate than the size of our national debt.Â As long as the Bank of Canada keeps real interest rates low (i.e. no more than 1% or 2%), Canada could conceivably run a deficit every year.
While I understand that the NDP must feel intense pressure to capture votes– including fromÂ people who have never taken a course from John Smithin–I often wish that the NDP would show a bit more policy leadership on the issue of the deficit and debt.Â I was particularly disappointed during the 2008 federal election campaign when Mr. Layton stated, unequivocally, that the NDP would not run a deficit in the following year if elected (even though it was clear that Canada was entering a recession).
For the record, I fullyÂ intend to vote NDP in this election.Â But I’d love to see the NDP get out in front of thisÂ issue at their next policy convention.