On deficits and disappointments


Andrew Coyne is a good conservative and a real conservative.  Many conservatives I know are adherents to a brand name.  Liberals = Bad, NDP = Lunatics, and Conservatives = Good.  It doesn’t matter if the Conservatives spend like drunken socialists and the Liberals cut spending or lower taxes.  Andrew Coyne is not like this.  He will actually stick up for conservative principles when the Conservatives betray them.  I’ve always appreciated that about him because he is consistent.  We need fiscal conservatives to add their voice in the governance of our country because sometimes they are right.  It is good and healthy to have a real debate.

Aside from their lack lustre environmental and energy policy the biggest beef I have with the Harper conservatives is that they are pretending to be Liberals and they don’t do it well.  If our government is going to spend like Liberals anyway why not let the party with a deeper talent pool manage all that money. 

I know that a great many economists are recommending these “stimulus packages” but I remain very sceptical.  In classic keynsian economics the problem of recessions is due in part to an oversupply of goods and services.   Lower interest rates and taxes combined with government spending stimulates the economy to pick up the slack and “jump start” the economy.  The slack is removed everything returns to a nice cozy balance.  We tried this a lot in the 70’s and 80’s and all it got us was a big fat debt we are still paying off.

At the heart of this recession is the consumer.  The average US consumer has borrowed so much money they can’t keep spending like they used to.  They maxed out their credit cards, then flipped that in to a home equity loan and went back and maxed their cards out again.  Now their home is worth 25% less than it did a few years ago.  Obama can throw another 815 billion dollars at this problem but he has to borrow money to do it.  This may pick up the slack and prop up housing and asset prices for a little while but if the root problem is debt, it will still be there after the 815 billion is spent and gone.  At the end people will still be in debt and the government will be in more debt. 

Debt is booze, and picking up another 40 of whiskey at the store might make an alcoholic feel a little better for a while, but when the booze is gone reality hits again.  The only way out of this recession is to default on debt or pay it off.  No one wants to start that process because it would mean deep cuts in spending and serious drop in everyone’s standard of living.  America would need to learn how to produce as many goods and services as it consumes. 

In Canada we are in better shape because we have much less debt however we are far too closely tied with the American economy to avoid the pain.  Our government can borrow money and spend it like drunken sailors but that isn’t going to change the reality that our biggest trading partner is going down the drain. No amount of Canadian “stimulus” can pick up that amount of slack.  If we spent money on anything it should be to build towards the next economy, not staving off the death of the old economy.

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