...when it comes to economic policy ...Canada has surprisingly often been the place where the future happens first.
And it’s happening again. On Monday, Canadian voters swept the ruling Conservatives out of power, delivering a stunning victory to the center-left Liberals. And while there are many interesting things about the Liberal platform, what strikes me most is its clear rejection of the deficit-obsessed austerity orthodoxy that has dominated political discourse across the Western world. The Liberals ran on a frankly, openly Keynesian vision, and won big.
...Which brings us to the issue of deficits and public investment. Here’s what the Liberal Party of Canada platform had to say on the subject: “Interest rates are at historic lows, our current infrastructure is aging rapidly, and our economy is stuck in neutral. Now is the time to invest.”
Does that sound reasonable? It should, because it is. We’re living in a world awash with savings that the private sector doesn’t want to invest, and is eager to lend to governments at very low interest rates. It’s obviously a good idea to borrow at those low, low rates, putting those excess savings, not to mention the workers unemployed due to weak demand, to use building things that will improve our future.
...So will the Liberals put their platform into practice? They should. Interest rates remain incredibly low: Canada can borrow for 10 years at only 1½ percent, and its 30-year inflation-protected bonds yield less than 1 percent. Furthermore, Canada is probably facing an extended period of weak private demand, thanks to low oil prices and the likely deflation of a housing bubble.
Let’s hope, then, that Mr. Trudeau stays with the program. He has an opportunity to show the world what truly responsible fiscal policy looks like.