Tuesday, March 20, 2007

Budget Reaction (It's Bad)

Some reactions to the budget:

"The $200-billion in program spending Mr. Flaherty has budgeted for this year works out to about $5,800 for every man, woman and child in Canada. Even adjusting for inflation and increases in population, that’s more than Paul Martin spent in his frantic last hours. It is more than the Mulroney government spent in its last days. It is more than the Trudeau government spent in the depths of the early 1980s recession. All of these past benchmarks of out-of-control spending must now be retired. Jim Flaherty has outdone them all." -- Andrew Coyne, the National Post.

"This (the budget) is so Liberal, the Grits should sue for breach for copyright" --- John Ibbitson, the Globe and Mail

"The federal budget delivered Monday by Finance Minister Jim Flaherty was conservative in name only. It increases the size and scope of activity undertaken by the federal government and relies largely on a host of activist economic policies rather than focusing on creating the right environment to encourage economic activity." -- Niels Veldhuis and Jason Clemens, the Fraser Institute.

Media Alert: I am going to appear on the Newsworld Program, Today this afternoon to discuss the budget.

Media Alert II: Will be on Mike Duffy Live to discuss the budget at 5:20 PM EST.


Vitruvius said...

H. L. Mencken said, "The government consists of a gang of men exactly like you and me. They have, taking one with another, no special talent for the business of government; they have only a talent for getting and holding office. Their principal device to that end is to search out groups who pant and pine for something they can't get and to promise to give it to them. Nine times out of ten that promise is worth nothing. The tenth time is made good by looting A to satisfy B. In other words, government is a broker in pillage, and every election is sort of an advance auction sale of stolen goods".

Prime Minister Harper can't change that. The most we can hope for is that he is the best auctioneer. Mr. Harper has a masters in economics, and one of his first actions was to appoint Mr. Lynch, who has a doctorate in economics, as Chief Privy Council Officer (head of the permanent civil service). Here's how some other economists and such are grading this buget:

A Clement Gignac, Chief Economist, National Bank Financial
B+ Craig Wright, Vice-President and Chief Economist, RBC Financial
B Sherry Cooper, Chief Economist, BMO Nesbitt Burns
B+ Catherine Swift, CEO, Canadian Federation of Independent Business
B Nancy Anthony, President, Canadian Chamber of Commerce
B John Williamson, Federal Director, Canadian Taxpayers Federation

Interestingly, perhaps, almost all the punditocracy are complaining about one thing or another. Of course, they make their livings by getting people upset, so perhaps that's to be expected. If ignorance is bliss, why are so many people unhappy?

Considering the above, and everything I've read to date, I'd have to conclude that this budget is pretty economically reasonable, which the best one can hope for in these sorts of auctions.

Based on the last few decades of Mr. Harper's work, I think that his long-term plan is to begin the devolution of power from the center to the provinces, and I happen to think that is the single most important thing Canada needs to do if it is to retain its current geographic form. In order to do that he needs to get and keep at least two majorities in the house. History suggests one needs about 40% of the popular vote to do that (depending on how the ridings split). He doesn't have that at this time.

I was a founding member of the libertarian party of Alberta in 1972. I think total government spending should be cut to about 1/4 of what it is now. That is not going to happen in my lifetime. So, given all the above circumstances, I'm not in the mood to quibble with Mr. Harper just because I get very little from this particular budget. I'm not *that* selfish.

Mr. Harper is, more importantly than anything else, the Chief Operating Officer of a large dynamic *system* known as the government of Canada. Like other large dynamic systems, such as the power grid, one can't turn it on a dime. Throw the wrong switch, and the north-east quarter of the continent loses power. What Mr. Harper can do is apply pressure toward effecting the shifts he wishes to encourage, and the biggest resource he has to that end is how to collect and deploy federal tax dollars.

So, for example, the provincial equalization changes, with his proviso that the provinces are responsible for funding their municipalities, is applying pressure in the decentralization direction. The gas-guzzler initiative applies pressure on manufacturers to continue to improve vehicular efficiency. The tax-haven measure puts pressure on the oligarchies to behave like proper corporate citizens. And the overall effect is to put pressure on Canada to not have another election right now: we're getting tired of elections every 18 months, and it would not be great for the Conservatives anyway.

Managing a large dynamic *system* requires strategies, tactics, and operations. If one hits the brakes too hard on a long train moving at high speed, one gets a train wreck. There are limits to what the operator can force on a spooled-up system.

Until just over a year ago, for 40 years Canada had been gaining momentum in the leftward direction. Now, it would appear, some people expect Mr. Harper to reverse all that momentum in just over a year, and with a minority government.

Those people are being unreasonable.

Gerry Nicholls said...

Vitruvius: I am not sure about those other folks but John Williamson of the CTF gave the budget a "B" for "Big Government".
It was not a compliment.

Miles Lunn said...

It seemed to be designed to please everyone, but because expectations were so high, it left people on both sides of the spectrum upset. The left was upset because spending was big enough, while the right was upset due to lack of tax cuts.

One thing Paul Martin understood as finance minister, set low expectations for the budget and at least you face less criticism.