Harper's Flaccid Stimulus

The Harper-Ignatieff stimulus budget was a flop.   Intended to create jobs in the face of an onrushing recession, it hardly made a dent according to Parliamentary Budget Officer, Kevin Page.

The survey by Phoenix Strategic Perspectives was done in the midst of the 2010 construction season and was commissioned by the Parliamentary Budget Office.

“It doesn’t score well on the employment side,” Mr. Page said in an interview with The Globe and Mail. “You’re spending a lot of money and it’s not creating very much in terms of jobs.”

The survey found the program was largely viewed as well run, but a summary report concludes only 33.3 per cent said the Infrastructure Stimulus Fund had a beneficial impact on unemployment. Its impact on unemployment was assessed as neutral by 43.3 per cent and negative by 20.6 per cent.

The Globe & Mail, naturally, frames the survey as going to the validity of Keynesian theory that government intervention and deficits are required in recessionary times.   In my view, the Globe take is pathetically simplistic.  If you search "pinata" on this blog you'll see what I'm getting at.

Back even before Harper first prorogued Parliament we knew there was going to be some sort of stimulus package forthcoming.   It was then that I pointed out what Harper and his clone never understood - pumping money into the economy works but it has to be put to work very strategically.  It has to be "new" spending and that money has to go on actual new investments that will pay back the taxpayers in the long run.  To achieve that the government itself must not only provide the cash injection but also identify the areas in which it will be "invested."

The Harper-Iganatieff "Pinata Budget" failed at the outset because it simply threw money around without controlling it.   You could put a deck on the cottage that you might have been planning on doing anyway.  The only difference there was that the government gave you a tax deduction for no net benefit to the country.   Provincial and municipal authorities were able to do the same sleight of hand spending only on a greater scale.

I know the scam because I did it.   I was going to have some structural landscaping done and along comes the Pinata Budget so I'm suddenly able to deduct the cost on my taxes.   Nobody got hired who wasn't going to be hired.  Nothing got bought or spent that wasn't going to be bought or spent.  All that happened was that the federal government went into deficit to give me a tax break - for nothing, absolutely nothing.

They could have kept that borrowed money and used it to construct a high-speed rail line, or a new electricity grid, or a host of other projects that would have generated real returns to the taxpayers in the decades to come when those deficits will have to be paid off.   But they wouldn't do that.  Harper was too ideologically bound to take responsibility for the money he was shovelling out and Ignatieff, fresh from writing a wonderful book about his mother's family, had no alternative plan which left the Liberals no choice but to back the farce of a stimulus budget.  Oh yeah, they put Stephen Harper "on probation."  Gag.

It is utterly irrelevant that the plan was administered well.   What matters is not how the plan was administered but whether it was sound - and it wasn't.  It was a loser from the start and it is to the current Liberal management's shame that they were complicit in it.