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When do you stop spending?

Jim Flaherty said today that he would spend to defend Canada from another recession

Under questioning from opposition MPs, Flaherty said for the first time that the Conservative government would move in with another round of stimulus spending if the world economy suffers a double-dip recession.

“We would obviously do what is needed” if there was a “dramatic deterioration” in the economies of the United States and Europe, he told the committee.

But for now, Flaherty said, the government is not changing its budget plan despite the turmoil on financial markets and debt crises in the United States and Europe. The plan calls for spending cuts of $4 billion a year to eliminate the annual federal budget deficit — now $32-billion annually — in a few years.

Pressed by opposition MPs about how Ottawa would react to a renewed global slowdown, Flaherty said he would change course and develop a pro-growth spending plan as the Conservatives did during the recent recession.

Here is my problem with this problem.  Do any of us think that the United States/Europe is going to fix their problems in the next recession.  I am not saying Flaherty is wrong but does this look like it’s going away.  Jeff Rubin points out that with global demand the way it is, as we come out of a recession, prices will increase and drive the economy back into it which means, how many of these recessions will we be able to afford to ride out until we are looking at Mulroney-esqe debt loads and Devine type deficits again.

We are looking at a default or massive bailouts for Greece, Italy, Spain, Portugal, and the too big to fail banks in Germany.  There is a dysfunctional governance system in the United States, and even China has some long term economic problems.  Does anyone think this next recession is going to be a quick one or we won’t be experiencing a triple or quadruple dip recession before this is all said and done?  No, me neither.

I know Jim Flaherty has been seeking out the advice of economic experts like former Calgary Flames captain Jim Peplinski but may the alternative might be figuring out ways to reinvent Canada’s economy to thrive in a world where recessions will be the norm, not the exception.

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