A permanent temporary plan

The Trudeau government is considering investing billions in a “recovery plan.” The trouble is, we’ve been in recovery mode for almost a decade.

Let’s take a trip down memory lane. The year is 2009, and the Conservative government is increasing the country’s debt load by more than $60 billion to “boost” the economy. Money is doled out to municipalities, regardless of their actual needs, and “infrastructure” spending takes on a whole new meaning as funds are invested in a circus school, a ferry to nowhere and lawn-bowling greens. Worse still, the spending comes as the economic recovery is already well underway.

Wasteful, you say? History is about to repeat itself. Spurred on by Bay Street economists, the Trudeau government is considering investing billions in a “recovery plan.” The trouble is, we’ve been in recovery mode for almost a decade.

The numbers speak for themselves. During Harper’s mandate, government spending soared to $276 billion in 2011 from $190 billion in 2006, partly because of the 2008 recession and the Tories’ stimulus plans. Public debt grew by more than $100 billion in four years, and continues to rise today to the tune of $476,000 per hour.

Once the recession was over, the government increased annual spending by “only” 2%. The problem is, it was pegged to the new — massive — stimulus spending base. The Canadian Taxpayers Federation criticized this approach in 2011, stating, “To accept current program spending levels as the base from which to measure growth in government, is to accept a permanent increase in the size of government.”

As Milton Friedman once said, “Nothing is so permanent as a temporary government program.” And so this level of “temporary” spending persists.

YOUR MONEY, YOUR “STIMULUS”

Sure, some roads and bridges need repair. But that’s because for years politicians neglected to spend on maintenance. Even so, an overpass is still an overpass, not a stimulus measure. So when politicians promise that infrastructure spending will create thousands of jobs, I doubt it means that an unemployed cook can become a bricklayer overnight or that a former shoe salesperson will finish the concrete work on a road in Toronto. Such jobs belong to construction workers and contractors with already busy order books.

The Conservatives’ economic recovery plan did not delay the 2008 recession in Canada.

The Bank of Canada’s interest rate cuts — which fuelled the housing bubble and encouraged Canadians to consume on credit — likely played a larger role.

Today, many economists doubt that another recovery plan will be effective. According to University of Calgary economics professor Trevor Tombe, each hypothetical job created under a Liberal stimulus plan could cost taxpayers $250,000.

If the government is committed to racking up billions more in debt, might I suggest a different approach? Why not mail each of us a cheque for a few thousand dollars? Instead of building bridges to nowhere, bailing out millionaire bankers or resuscitating dying companies, some of us will reduce our mortgage, buy shoes for our children or pay off our credit cards. After all, it’s our money. Who knows, some of us might even save it. How crazy would that be?

Alas, the very idea of giving us back our tax dollars borders on heresy for economists. In their view, an economy recovers when bureaucrats spend and governments incur debt. Yet, personal and government debt and the reliance on easy credit are leading us to another crisis. Piling on more debt is certainly not the answer.

About the Author

David Descôteaux


David Descôteaux is a Montreal-based business columnist.

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