Now it’s obvious what the pre-budget leaks were about. They were softening us up, so when we saw the actual $84.9 billion five-year deficit figures we’d go, oh well, that’s only $20 billion more than the $64 billion over two years they already said, and what’s $20 billion to government? Other than a giant familiar debt sinkhole, I mean.
For numbers like that, we might as well have elected a Liberal government. Or not; the front-page chart in Wednesday’s Citizen showed a flood of Mulroney Tory red ink followed by a decade of Liberal surpluses and now more Tory red ink. You don’t have to like Liberal governments (and you know I don’t) to acknowledge they seem to be better financial managers. But facts are facts.
Including that it’s silly for people to talk about this Tory government abandoning “its conservative antipathy to spending.” It hasn’t got one. Never did; it inherited spending of $209 billion, and promptly hiked it to $222 billion, $233 billion then $237 billion in good times. Now in hard times it’s to rise to … say, they didn’t mention that in their press release, did they? Or in the budget speech, come to think of it. Nor did the press dwell on it; I had to get to the 19th page of Wednesday’s National Post for John Ivison to blurt out that the spending target five years out is $293.7 billion. Continue reading
I’ve always treasured a crack by Rose Friedman about the illusion of precision in economics. Her husband Milton was half-way through declaring that if you can’t measure something you don’t really understand it when she interrupted with “If you can’t measure it, measure it anyway”. Which brings me to Michael Ignatieff’s latest swaggering statement that he and his party will support the Tory budget provided they get quarterly updates including how many jobs it is creating. The trouble is, you can only know how many jobs it created if you know exactly what would have happened in employment markets if the budget had been different or absent. And since we can’t run history two different ways we can’t even if we have really fast computers that let us pretend we’ve somehow created a spreadsheet that completely accurately captures every interrelationship in the economy and accounts for chance as well. (To test this proposition, plug 1980 data into the spreadsheet and see if it predicts 1985.) On the plus side, this approach lets talking heads sound wise and politicians talk tough while acting weak. If you think that’s good.
Uh, that’d be eight four nine zero zero zero zero zero zero zero zero. So if you earned $84,900 a year you’d have to work for a million years just to pay for the deficits the government expects to run over the next five years. To pay for their planned total spending in 2013-14, you’d have to work for three and a half million years. Amazing how a few years in politics lets people smirk while hurling sums like that into the furnace.
The latter part of the 19th century was a period of appalling economic crisis in America. 1873-1896 was known as “The Great Depression” long before the 1930s came along. Farmers faced falling prices, workers toiled in massive new factories for low wages and went home to seedy slums if they weren’t killed in industrial accidents; politics was explosive and fears or hopes of revolution were everywhere. It was also the most rapid economic growth the nation ever experienced. Because back then governments knew how not to do dumb stuff.
The statistics on economic growth in the period are extraordinary. Economic output quadrupled; manufacturing output increased six-fold. Railway track in operation rose from 53,000 miles in 1870 to almost 200,000 in 1900 and ton-miles of freight hauled increased ten times just from 1870 to 1890. By 1894 the United States was the world’s leading manufacturing nation, on its way to producing one third of the world’s manufactures by the start of World War I.
A few mores statistics if you’ll indulge me. On the eve of the Civil War total power available in the U.S. was round 13 million horsepower, two-thirds of it more or less literally, that is, produced by animals. By 1880 steam exceeded animal power; by 1900 steam engines accounted for two-thirds of the 65 million horsepower available. And while the 1880 census didn’t even mention electric power, by 1900 it was gaining fast on steam. Continue reading
[From the latest issue of C2C: Canada’s Journal of Ideas]
It’s starting to look like 1933 out there. With the stock market in a shambles and the economy slumping, governments are racking their brains, and history, for expensive solutions. But they are not finding what they think they are.
I had the privilege of teaching American history at the University of Ottawa this fall and as usual it was amazing how directly relevant the past was to modern experience. Barak Obama and the jagged racial scar running across American history seemed most pertinent when term started. But when the stock market collapsed, the importance of the Great Depression and various governments responses to it suddenly jumped to the head of the queue – especially the American response.
Policy-makers seem to have drawn sensible lessons from the disastrous post-Great Crash outburst of “beggar-thy-neighbour” trade policies, including the infamous American Hawley-Smoot Tariff, which not only worsened the economic agony but also fostered conditions conducive to war, as nations denied access to resources through trade sought to seize them by force. But something else happened in the 1930s with clear and immediate relevance to the present: Franklin Roosevelt’s New Deal. Continue reading
During the campaign, the Tories said no deficits; wouldn’t be prudent. Now they insist that only hair-raisingly huge deficits are prudent. As, apparently, is leaking your budget so it won’t terrify people on the day. It’s as if “prudent” were a magic word that justifies anything you decide to do. Except they didn’t really decide to do this. Spending rockets up in good times and bad and when revenue drops off big deficits gape and none of it is the result of financial or political calculation. It’s structural features of the budget the politicians neither control nor understand so they babble gravely in an attempt to look relevant.
Happy budget day.
Yes, he gave a good speech. We knew he could do that. The question is whether he can deliver on one key passage.
Not the bit about “we are ready to lead once more.” Among many nasty things you could say about George W. Bush, that he wasn’t prepared to lead in foreign policy would be among the most fatuous.
The key passage was “Our economy is badly weakened, a consequence of greed and irresponsibility on the part of some, but also our collective failure to make hard choices and prepare the nation for a new age.” As in, cut middle-class social programs.
One commentator managed to say this passage should have had the outgoing president “squirming like a schoolboy getting a licking” because “When he said collective failure, he surely meant the sorry stewardship of Mr. Bush.” Continue reading
Talking about the Battle of the Plains of Abraham.