I (and about another dozen press gallery journos) are about to hop in the back of Prime Minister Stephen Harper's military Airbus to head Cannes, France for the G20 summit where leaders will be consumed with the harrowing debt situation in Greece in particular and in Europe more generally.
Inevitably, we will be wondering if the Harper government should continue with its “steady as she goes” approach focusing on debt reduction or whether, as the NDP has argued, it is time for a new round of stimulus.
I argue today that now is not the time for Canada to act though it should be ready to do so …
… as we’re seeing now in Europe, a government that does not have its fiscal house in order is powerless to help its populace when it most needs help, usually in a recession.
So Flaherty [austerity focus], for now, is right.
Since Canada is not in a recession and, assuming our good luck holds, will not be in a recession for the foreseeable future, it is prudent government policy to do what we can to clean up the federal balance sheet.
After all, the Canadian economy, with some help from government stimulus programs, has created more than 650,000 jobs since July 2009.
As Harper has been boasting on the international circuit, “Canada is one of only two G-8 countries that have more people working now than before the 2008 recession.” [Read the rest]
Armine Yalnizyan, senior economist with the Canadian Centre for Policy Alternatives, argues that now is precisely the right time for more spending:
Prime Minister Stephen Harper and Finance Minister Jim Flaherty have championed deficit reduction and austerity measures at G20 meetings since summer 2010.
But [Nobel Prize-winning former chief economist of the World Bank, Joseph] Stiglitz says the austerity agenda misses the point: budget cuts simply shift the risks to the private sector and raise the economic stakes, in both the short and long term.
“Austerity is a suicide path” Stiglitz said bluntly, the opposite of what the global economy needs.
Balancing the books by trimming public spending guarantees even slower growth given the underwhelming nature of private sector investments in job creation and production.
The solution isn't more stimulus through more quantitative easing either, Stiglitz says. “It stretches credulity that more leverage will fix the problem.”
No, the solution is to tax and spend. [read the rest]