I ignored the Canadian campaign of Justin Trudeau last summer, especially after Trudeau vowed that if he became Prime Minister, the Canadian government would have a balanced budget by the end of his first term. Trudeau was as pro-austerity as were the conservatives he ran against. Same old garbage.
However Trudeau changed after he became Prime Minister (4 Nov 2015). He and his Finance Minister (Bill Morneau) now admit that the Canadian government needs to have a deficit after all.
The corporate media outlets are condemning Trudeau, since they are owned by the rich, who want the masses to have more austerity (always more). However Trudeau has survived their attacks.
(The media outlets would scream even if they weren’t owned by the rich, since the Big Lie gives them a fake “crisis” to whine about.)
When Trudeau is asked why he wants to spend more, he responds, “My party, the Liberals, have a mandate from Canadians to invest rather than cut. We promised to invest in the future of this country and that’s exactly what we’re doing.”
“Invest” means run larger deficits.
Trudeau’s Finance Minister (Bill Morneau) correctly says that more austerity (i.e. deficit reduction via spending cuts and / or tax increases) will worsen Canada’s recession.
Even the head of the Bank of Canada (Stephen Poloz) admits that monetary policy cannot stimulate the real economy. The Bank of Canada and the U.S. Federal Reserve slashed interest rates, supposedly to encourage businesses to take advantage of low interest rates to invest in job-creating production. However it didn’t work. So now, even Stephen Poloz admits that Canada needs fiscal stimulus (i.e. a larger federal deficit).
Even Bay Street executives are saying that fiscal stimulus is needed! (Bay Street refers to Toronto’s financial district. It is Canada’s equivalent to Wall Street.) Now that is significant. In the USA, Wall Street loves austerity, because it widens the gap between the rich and the rest, and because austerity reduces the peasants to being debt slaves of Wall Street.
“We support the Trudeau government’s commitment to make sizeable investments in infrastructure,” says Brian Porter, president and CEO of Scotiabank.
(Scotiabank, or the Bank of Nova Scotia, is the third largest bank in Canada by deposits and market capitalization. The biggest is Royal Bank of Canada, followed by the Toronto-Dominion Bank. The government’s central bank is the Bank of Canada, which corresponds to the Bank of England, or the Fed in the USA.)
“During this time of slower economic growth, we would encourage the government to boost the amount and timing of these investments,” Porter said.
Wow. Has the worm turned in Canada? Is the Age of Austerity in its twilight? Maybe. At least Trudeau is urging global leaders to rely more on government spending and less on monetary policy to spur growth.
“My message to other government leaders is don’t fall into the trap that thinking that balancing the books is an end in itself. It’s a means to an end.”
Trudeau’s words coincide with an increasing sense in global circles that monetary policy has reached its limit, fueled in part by Japan’s surprise move to adopt negative interest rates.
Of course, the deficits being proposed by Trudeau and his finance minister are still very small. The first year’s projected deficit of $29.4 billion is only1.5 per cent of Canada’s GDP. Still, any deficit increase from current levels is good.
Also, federal spending on social programs is set to rise to just 14.6 per cent of GDP one year from now. That’s much less than the late 1970s, when social spending was around 20 per cent. Still, any deficit increase from current levels is welcome.
Some people say there won’t really be a deficit increase. Rather, there is simply more honest accounting. They say that Harper and the Conservatives ran deficits, but used fiscal tricks to create the illusion of surpluses. But even if that’s true, at least Trudeau isn’t praising austerity. Trudeau is saying, “Yes the deficit will grow, and it needs to.”
Translation: we need less austerity.
That’s the opposite of what the Conservatives said.
Trudeau’s first budget will help students gain experience by creating 35,000 additional jobs each year under the Canada Summer Jobs program. The government will also strengthen co-op and on-the-job learning opportunities that will help students land that all-important first job after graduation. Such a move in the USA would bring howls of derision from conservatives.
Of course, increased deficits alone will not help the economy. We must monitor where the money is spent. If privatization mania is not brought under control, then the rich will steal the extra money. Charter schools, for example, are privately owned, but collect local tax dollars.
Reader “Steve” saw a post about this in another blog, and responded, “The owner and sole source of Canadian dollars in the world has to borrow Canadian dollars from another entity in order to spend beyond tax revenues? Who knew?”
True. The Canadian government does not borrow its spending money. Of course, Steve’s comment was ignored. Most people wouldn’t even understand it.
Canadian Finance Minister Bill Morneau has boldly announced that starting in July 2016, nine out of 10 families will receive more money than they did under the previous (Conservative) government in the form of child benefits; about $3.7 billion more overall. The benefit will funnel more cash to families with lower household incomes, while eliminating payments altogether for those with household income topping $200,000 (USD $151,000).
Naturally the Conservatives are denouncing the Trudeau-Morneau budget as “reckless spending,” since the budget doesn’t benefit the rich alone. (Federal spending is only “reckless” when it narrows the gap between the rich and the rest.) Conservatives are whining that the current budget has no plan to reduce the Canadian government’s deficit. That is, the budget does not center on austerity for average Canadians. Hence the Conservatives claim that it is full of “red ink.”
Anyway this is all a pleasant surprise. We’ll have to keep our eyes on Canada.