The Disastrous Incompetence Of Harper Goes On

Remember the "good old days" when Harper was harping all about his "expert" conviction that there would - and could - be no deficits?

Remember also when Harper and his Financial Minister cronie spoke of "modest surplusses"?

Then remember when he and his Finance Minister cronie began mumbling about "small deficits"?

Only to come full about face by stating that deficits would be "essential"?

Well, take a look at what "essential" means:

Government will run $34B deficit for coming year: official

The spokesman said Thursday that the federal government will return to running a surplus within five years.

More precisely (emphasis added):

The Conservatives plan to run budget deficits of $64 billion over the next two fiscal years, according to a senior government source, which marks a sharp reversal from predictions the Tories made only a few months ago.

Next year, the government will spend $34 billion more than it takes in, with a deficit of $30 billion slated for the year after, the official said.

(...)

Just two months ago, the Tories flatly dismissed that deficit spending was imminent and championed their conservative fiscal policies.

And during the fall federal election, Harper said repeatedly that his government would keep the country's finances out of the red.

And Harper is quite comfortable with all of this (emphasis added):

Putting the finishing touches on a budget that will sink Canada deep into deficit, Prime Minister Stephen Harper insists he isn't spending billions to ensure his government's survival.

In an interview with Sun Media, Harper said he's comfortable with spending the country's way out of a recession.

(...)

Harper: "There are two things. First of all there has been some deterioration in forecasts we've received from the private-sector forecasters since (November) that is responsible for part of the deficit. But a lot of the deficit will be actions the government is undertaking in the budget. Deliberate actions to stimulate the economy over the next two years in particular."

(...)

Harper: "(...) As you know, I'm an economist and a big believer in a market economy. But I also know as an economist that there are times when the macro-economy does not function. We're in an economy we have not seen in six decades, where economic activity is slowing very rapidly because of a world-wide cycle of fear and pessimism, and where businesses will not invest money, bond-holders will not buy because they're worried about capital losses, consumers will not spend. And I know that in those circumstances, the only thing for the government to do is to move in the economy, make investments and put people to work."

The facts are, prior and during the past elections, he denied smugly all those expert forecasts which raised the alarm about our economy going into a recession, but finally and grudgingly acknowledged said forecasts more than a month after he was re-elected.

More lying and hypocrisy indeed ...

Unless when Harper spoke (above) of "private-sector forecasts", he meant strictly those of the CD Howe Institute? After all, Harper and Flaherty are known to follow the advice of these folks quite judiciously (emphasis added):

Stephen Harper and Finance Minister Jim Flaherty have relied for financial advice on the CD Howe Institute. To assist them in the preparation of the upcoming federal budget they have assembled a panel of advisors, noteworthy for the inclusion of billionaires, such as James A. Pattison, James Irving, and Paul Desmarais Jr. The CD Howe Institute has offered the kind of orthodox economic advice - more market, less government - that has landed the world in its present grave economic crisis. The billionaires have been consulted on the very dubious proposition that those who have made fabulous sums for themselves know how to run an economy. What they do favour, very much in keeping with Harper government thinking, are broad-based tax cuts. We've already heard from Flaherty that he's been advised by those to whom he pays attention that tax cuts are needed to stimulate the economy.

Tax cuts to stimulate the economy ... hmmm ... where did I hear that before?

Ah, yes.

So to make things clear: it looks like Harper and Flaherty played the deaf to all those experts waving the alarm flag of a coming recession until their revered CD Howe Institute finally told them that, yes, it was true? And nevertheless, they intend to run "essential deficits" to help our economy with mainly ... tax cuts?

Could well be:

Tax cuts are the key here. The long-term goal of Stephen Harper is to reduce the role of government in our socio-economic system and to heighten the supremacy of the market. Tax cuts, in the guise of stimulus, would push this agenda forward.

Could be indeed:

(...) instead of managing the economy, Harper "has been focused on a strategic view that what he wants to do is cut taxes, hamper future governments, downsize governments, and essentially get out of as many areas of government as he can. It's very much a Conservative orthodoxy that government has no role in the economy," and Harper is doing all he can "to cause it to be the case."

"For a guy who claims to be an economist, he's been pretty disappointing," said a former senior executive at Finance Canada

But what about spending on infrastructure instead - the proven way out of a recession?

Apprently, there might be some in the upcoming Harper/Flaherty budget:

The size of the deficit is largely attributable to the Conservative government's decision to include billions in stimulus spending beginning in this year's budget. That includes immediate spending on infrastructure and help for Canadians hit hardest by the economic downturn.

Obviously, considering the alledged size of said deficit spending, it looks like it may be far from enough to do the job (emphasis added):

What will work is direct government spending on infrastructure. Canada's cities have billions of dollars worth of projects costed and planned sitting on mayor's desks. We should and could start with these within a few weeks. Taking a little longer would be major renewal projects such as the construction of new subway lines in major cities. Finally, there are longer-term projects such as the building of new high-speed rail systems in the corridor from Quebec City to Windsor, from Edmonton to Calgary and from Moncton to Halifax. Refitting houses across the country for greater energy efficiency belongs on the list. So too, does large scale job training and the investment of funds to reduce barriers to post-secondary education.

All of these measures would be investments in Canada's future. These projects would increase the nation's productivity. The returns on these investments would defray the cost of making them.

Scale matters here. Anything less than $50 billion a year, for the next few years ($50 billion is about three per cent of Canada's GDP) will be insufficient. This level of spending, and more, would create jobs for hundreds of thousands of Canadians. Without such stimulus, the job losses we have seen in construction, manufacturing, forest products, retail, and even in the petroleum sector, can be expected to continue apace. The presence, or absence, of such a program on this kind of scale is how we should judge the budget.

Hence, it looks like regardless whether Harper and Flaherty inject all their cherished tax cuts or not, the deficit spending amounts already leaked for the upcoming budgets of the next two years will fall quite short of the $50B mark.

But here's the clincher (emphasis added):

Bank of Canada sees return to economic growth later in 2009

The Bank of Canada is projecting a sharp recession that will see three quarters of economic contraction before growth returns in the second half of 2009.

In its update to its Monetary Policy Report, the central bank said it anticipates quarter-over-quarter contractions of 2.3 per cent in the fourth quarter of 2008, followed by a deeper drop of 4.8 per cent for the first three months of 2009 and a drop of one per cent in second quarter of this year.

However, the bank sees a rebound to positive activity by the third quarter of the year, when it forecasts two per cent growth and 3.5 per cent expansion in the last three months of the year.

The bank said the return of normal financial conditions, coupled with the stimulus coming from monetary and fiscal policies, should boost the growth of consumer spending in 2010, leading to growth for the year of 3.8 per cent. The recent depreciation in the Canadian dollar will also lend support to a recovery, it added.

Such a forecast falls well in line with a previous one of its own, as well as with those of others (emphasis added):

Economist Craig Alexander of TD Bank told CTV Newsnet Thursday while he does agree that the worst of recession should be over within six months, he forecasts a much slower recovery than the Bank of Canada.

Not surprisingly, however:

The predictions of the central bank are much more optimistic than those recently offered from other private-sector economists and parliamentary budget officer Kevin Page.

So, to recap: by mid-2009, the economy should be picking up steam again - whether slowly or a little more quickly. Nevertheless, we'll be out of the recession. However, Harper apparently does not agree with this forecast, if only because his budget will run deficit spending not only in 2009, but in 2010 as well - and then return to running a surplus in five years?

And we should take the word of Harper-the-economist because ... ?

(Just return to the begining of this post, folks)

In other words: Harper is ignoring yet another expert forecast - the Bank of Canada (yet again).

Talk about being out of touch indeed.

One more time: he places ideology and politics ahead of what is best for his country.

Nothing new here.

Seventh Principle of Incompetence, anyone?

In the end, I suppose we'll all be fully briefed come January 27, 2009 - and then we'll know the full horror of it then.

Happy with yourselves, my fellow Canadians?


(Cross-posted at NetRoots)