William Robson: Canada knows what smart fiscal policy looks like. We should not be doubling down on dumb

For Canadians concerned about national finances, the 2019 federal election campaign has been a double whammy. Personal smears and social-media mobbing have mostly eclipsed substance. And the discussions of budgetary policy that have cut through the noise have been discouraging. Especially the commitments for more and bigger deficits: even more red ink in the next four years than was spilled in the past four.

The concept behind smart stabilization is not controversial. Suppose the economy is slowing. Lower incomes and spending reduce revenues, while income supports and stimulus raise spending. Letting the bottom line slip toward deficit avoids disruptive changes in tax rates and programs, maintaining confidence and cushioning the slump. When the economy picks up, the opposite happens. The boom raises revenues and reduces spending.

Targeting the ratio of federal debt to GDP would have been less smart. A long-run debt-to-GDP target is not a serious constraint. Even if Statistics Canada did not regularly revise its GDP numbers, which it does, governments can’t credibly commit beyond the next election. For its part, a short-run debt-to-GDP target is just silly — it’s a promise to make the debt grow as fast as the economy. So a fast-growing economy means a bigger deficit. A slow-growing economy means a smaller deficit.

IvisonJ Such an excellent read.

Agreed! outoftouch

fpcomment both the Liberals as well as the Conservatives aren't very fiscally smart look at the example of the party in Ontario going back to 1995 to present day situation. JustSayNo!! VoteNo!!

fpcomment Too bad the country is current lead by dumb. Time to replace it with smart.

fpcomment That's why Libs will win.

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