Thursday, October 23, 2008

Deficits As Sin

The Globe and Mail has an editorial today, decrying deficit spending. It reads like a sermon on the evils of drink from the early 20th century. The parsons who control the editorial boards in this country had better get one thing straight, we are in a world of trouble and the last thing governments need to do is stop spending. If the Great Depression taught us anything, it was that during times of economic contraction, the worst course of action is to exacerbate the contraction through government spending cuts. It may make the editorial boards of our papers feel good by making balanced budgets somehow more virtuous, but it bears no relation to the realities we are facing. If we are to get through these next few years with as little pain as we can manage, everyone -- governments, opposition parties, the public, and the press -- is going to have to realize issue of balanced budgets is not one of virtue versus sin. It is simply a rational decision to minimize the damage caused by a lack of private sector spending. Browbeating governments into making the situation worse may make us feel better in the very short term, but it is a position that will come back to bite us, and sooner than we think.
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  1. Deficits should only be acceptable after some of the planned tax cuts are cancelled.

  2. I'm a pessimist about the government -- I say keep taxes low and stay in the black.

    If that means cutting a few programmes, so be it.

  3. Are you willing to put military on the chopping block, Ben?

  4. Deficits should only be acceptable after some of the planned tax cuts are cancelled.

    I am not so hawkish on that, as long as everyone realizes the impact on revenues. If however the opposition and the government harp on the "no deficits, no matter what" line and allow the government to use the cuts as an excuse to cut government spending, then I have a problem.

    The other problem I have is what happens after the recession ends. With conservatives it is tax cuts all the time, no matter what. I think tax policy is not a one way road. Sometimes they should go up and sometimes down. It is no accident that our income distribution numbers have become so screwed in the last twenty years.

  5. Robert --

    It depends on the future orientation of Canadian foreign policy.

    If we want to stay in NATO, no, I wouldn't be willing to cut the military to the bone again -- we just can't do it and remain credible.

    But if we decided to go neutral like Sweden or Switzerland, which might be a more honest reflection of where a majority of Canadians' minds are at, then we should be willing to look at cutting the big ticket items meant to improve Canada's ability to project force abroad. (The air transports, etc.)

  6. Let he who never carries a credit card balance from one month to the next, cast the first stone.