# And now.........deficits are a good thing.



## sags (May 15, 2010)

The last few days on BNN, guests have been coming on extolling the virtues of deficit spending.

The Liberal's proposed $10 Billion a year deficits are nearly enough they say.

Sherry Coooper, chief economist at Dominion Lending Centres and David Rosenberg, chief economist and strategist at Gluskin Sheff say that much more is needed to get Canada out of the economic doldrums.

Trudeau the "big spender" is now Trudeau the "cheapskate".

http://www.bnn.ca/News/2015/11/20/R...80s-90s-mentality-about-running-deficits.aspx


----------



## GoldStone (Mar 6, 2011)

Yeah, deficits worked wonders in Ontario. :stupid:


----------



## Moneytoo (Mar 26, 2014)

And fat is beautiful! lol


----------



## The_Tosser (Oct 20, 2015)

> Rosenberg is baffled by the fact that some Canadians are adverse to deficit spending while nation-wide employment is “barely more the 60 percent,” and “no higher than it was coming out the depths of the worst global recession since the 1930s.”
> 
> “The reality is we had a negative economic shock in the past 18 months and we’re just sitting here not doing anything about it.


Rosenberg pretty much nails it. I suspect he'd go even further as it's highly likely he understands the monetary system enough to do so, but he know Canadians everywhere including a majority of CMF members don't really have a clue.

The federal 'deficit' to use a term that most do, is not a specific number, ratio, percentage etc. It's simply the amount of money that needs to be 'spent' into the economy by the issuers of the currency, so the USERS of the currency can operate to full employment and full capacity. That means the provinces on down to us as individuals. It makes zero sense to speak of 'balancing' a federal budget, or give a time frame to have it done, or to talk about the 'size' of it. 

As Rosenberg said quite correctly, why on earth is the Fed Gov not 'spending' like they should be when the economy is where it's at. He's absolutely right. Until people understand that currency issuing Fed 'spending' is much different that currency users spending, we're going to have this misunderstanding.


----------



## andrewf (Mar 1, 2010)

It's misleading to look at employment rather than unemployment. The reason why employment is lower today than in the 30s is because we have a huge number of old people. Unless you're going to make granny work at Walmart or McDonalds, or put her on an ice floe, we're not likely to hit similar levels of employment.


----------



## brad (May 22, 2009)

The_Tosser said:


> As Rosenberg said quite correctly, why on earth is the Fed Gov not 'spending' like they should be when the economy is where it's at. He's absolutely right. Until people understand that currency issuing Fed 'spending' is much different that currency users spending, we're going to have this misunderstanding.


Amen; most people are totally clueless about this fundamental distinction. A good plain-English explanation by an economist can be found at http://econproph.com/2011/07/14/private-debt-vs-government-debt/


----------



## The_Tosser (Oct 20, 2015)

brad said:


> Amen; most people are totally clueless about this fundamental distinction. A good plain-English explanation by an economist can be found at http://econproph.com/2011/07/14/private-debt-vs-government-debt/


lol Holy ****. I've met my first one on CMF!

Nov 23rd, 2015. I am writing it down, lol.

We're gonna get a quicker truth-conversion than Islam. I can just feel it.


----------



## The_Tosser (Oct 20, 2015)

Andrew, when we talk about 'full employment' it's understood that we mean working age of able bodies.
If you think we do not have an employment problem of these people, i don't think we have much else to discuss. We have a long way to go before we get to full employment and full capacity output in this country. It's disgraceful.

Don't get hung up on silly side-issues and definitions when people clearly do not understand the brunt of the topic.


----------



## CPA Candidate (Dec 15, 2013)

Whether deficits are good or bad depends on who's running them. If you like the person, then deficits are a good idea, if not, it is proof of mismanagement.

I'm not entirely convinced government spending to stimulate demand is anything other than a short-term, artificial boost. I don't really believe that you can sustain long term healthy growth from government deficit spending. Having studied Keynesian economics a little bit and watching it in action over the past 5-6 years, the results are underwhelming.


----------



## HaroldCrump (Jun 10, 2009)

The state is not just some benevolent actor in this game, carefully reallocating resources and re-distributing income in the most efficient manner possible to create growth - that is all naïveté.
The apologists for "deficit spending" - such as the shills for the new Liberal administration unleashed on social media in the last month since the elections would have us believe so.

The state is influenced by lobby groups, including both big labor and big business, which directs the spending.
The new money goes into financing pet projects that benefit either big labor or big business, not the consumers and taxpayers.

It is true that deficit is simply spending more than revenue.
Another way to look at it is - govt. putting more into the economy than it is taking back.

That sounds great - except that the spending is not all benevolent social welfare spending.

A lot of it (perhaps most of it) is either big labor welfare or corporate welfare.

Corporate welfare such as big bailouts and subsidies for corrupt, inefficient companies like Bombardier, Chrysler, etc.
Labor welfare such as bribes to unions, egregious benefits and pensions to public sector, etc.

Over time, govt. takes on more and more debt, and one fine day wakes up to find that not only is the deficit still there, but the debt is crushing as well (such as Ontario).

Raising taxes appears to be an easy solution to fix the (real or imagined) problem of deficits - except that it doesn't actually work.
Govt. spending expands automatically YoY to absorb all new revenue sources, and the cycle starts all over again.

To run a deficit or not is the wrong discussion, which taxes to raise is also the wrong discussion.
The right discussion is how to provide same services at a lower cost (i.e. reduce the cost of public sector).


----------



## Rysto (Nov 22, 2010)

CPA Candidate said:


> I'm not entirely convinced government spending to stimulate demand is anything other than a short-term, artificial boost.


That is exactly the point. When the economy is underperforming due to a collapse in aggregate demand, deficit spending counteracts that effect. In the long-term, aggregate demand will normalize and the government needs to cut back on spending.


----------



## LBCfan (Jan 13, 2011)

Rysto said:


> That is exactly the point. When the economy is underperforming due to a collapse in aggregate demand, deficit spending counteracts that effect. In the long-term, aggregate demand will normalize and the government needs to cut back on spending.


Thanks for sharing.


----------



## HaroldCrump (Jun 10, 2009)

Rysto said:


> the government *needs to cut back on spending*.


^ Yup, that happens. Every time.


----------



## andrewf (Mar 1, 2010)

The Conservatives did it over the past few years. They constrained spending growth and quietly eliminated some programs. After all, the federal government is now the smallest it has been since the 1950s. 

Harold, I think you would help your argument if you toned down the cynicism a bit. You just end up sounding like a crank who will never be satisfied.


----------



## HaroldCrump (Jun 10, 2009)

andrewf said:


> The Conservatives did it over the past few years


No, they did not...the federal debt went up.
They merely re-distributed the expenditure.
Some programs were cut, while others were expanded (such as the health transfers to the provinces).



> Harold, I think you would help your argument if you toned down the cynicism a bit. You just end up sounding like a crank who will never be satisfied.


Well, the tax & spend crowd is certainly satisfied now, right?
It's time for your ilk to wring their hands in glee at the prospect of massive deficit spending over the next 8 - 12 yrs.
For the last 9 yrs you guys were the cranks who were never satisfied...give me the chance now to be the crank.


----------



## CPA Candidate (Dec 15, 2013)

Rysto said:


> That is exactly the point. When the economy is underperforming due to a collapse in aggregate demand, deficit spending counteracts that effect. In the long-term, aggregate demand will normalize and the government needs to cut back on spending.


I understand the model, just tend to believe that demand will not normalize after it's over - it will simply go back to where it was. Government deficit spending usually takes the form of multi-year infrastructure projects that create employment, but those jobs don't have a reason to exist afterwards and tend to benefit certain sectors over others.


----------



## sags (May 15, 2010)

My son and his crew recently finished putting security fencing around their fourth solar farm this year. Before he arrived on site, other trades had levelled the ground and poured the concrete bases for the solar panels.

After the fence is completed, other trades will install all the solar panels and electronics to turn the panels to track the sunlight. When the whole project is completed some people will have full time jobs in maintenance and security for the site. The site will supply power to the electric grid and the cost of solar power has been declining rapidly as technology has evolved. It is sustainable energy for the future.

While working in the area, all the workers stayed at a local motel and ate at local restaurants. They bought parts from suppliers all over the Province.

A new subway line being built in Toronto creates jobs all over the Province. The concrete rings are made in Ontario and Ontario truckers transport them to the job site. The subway cars are built somewhere, hopefully in Canada.

When it is completed, subway drivers, maintenance and security will be required for the new line.

Infrastructure creates many immediate jobs and jobs after they are completed. A new hockey rink needs maintenance staff. A new hospital has to be staffed by doctors, nurses and technicians.

Current conditions are favorable for spending on infrastructure, because we need it and for the jobs they create. The cost will never be less than it is today.

We could refuse to spend the money, cut taxes and let everything fall apart around us. 

But, what would be the point in doing that ?


----------



## HaroldCrump (Jun 10, 2009)

sags said:


> We could refuse to spend the money, cut taxes and let everything fall apart around us.


That is a little bit extreme, don't you think, how you went from cutting taxes to everything falling apart.
No one is suggesting cutting taxes to 0%.

Also, the tax cuts have already been done in the last 6 years or so, starting with the GST cut.
I am not sure who is asking for _additional _tax cuts - I don't think I have suggested that.

The Harper election campaign did not include any other major tax cuts, although there were a few marginal ones, such as increasing the HBP limit (which I don't agree with).

What the new govt. has proposed is tax hikes by rolling back the TFSA limit, income splitting, as well as new tax rates (some lower, some higher).

Keep in mind that the story does not end at tax cuts...those don't disappear from the economy.
Tax cuts puts $$ back into the pockets of people, including the traders working on your fence.

People then have the choice to do several things with it - they can spend it, save it, invest it, etc.
Another option is to pay off personal debt, esp. high interest credit cards, car loans, etc.
All of these benefit the economy.


----------



## Brian K (Jan 29, 2011)

I'm on Harold's side of the fence. We swung to the right for a while and now we are swinging left. I hope we swing back pretty soon before Junior increases the mortgage my kids will have to pay.


----------



## peterk (May 16, 2010)

Brian K said:


> I hope we swing back pretty soon before Junior increases the mortgage my kids will have to pay.


Doubt it. He's very young, boomers are retiring and will be shifting left, and the victimhood/equality propaganda machine in schools and universities has been running on overdrive for a number of years now, teaching our 10-25 year olds to be good liberals. They'll be 20-35 year old voters shortly... 

Nope, there's a good chance we're stuck with JT for a good 15+ years. The best we can hope for is that he'll spend a big chunk of the money on building new things and infrastructure upgrades that will last for generations, and not just dumping it all down the drain of government salaries for jobs that shouldn't exist, welfare programs, and various pointless inquiries and studies costing $50M a pop.

I think the prudent thing to do is accept the Liberals will be in power for a long time now, and try to get them to at least spend the vast amounts of money they insist on spending on something useful.


----------



## jetsfan (Mar 20, 2015)

..


----------



## Rusty O'Toole (Feb 1, 2012)

Yes sovereign governments can print money with no limit, borrow to infinity and deficit spend like there is no tomorrow and no one can stop them. I remember a teacher at my old high school explaining the same thing to me, that governments can borrow and spend and never pay the money back, just roll it over to infinity. He was quite tickled by the thought. This was during the first Trudeau administration when government spending went through the roof, just before we got into the double digit inflation, 20% interest rates and the collapse of private industry across the country.

Of course there is no connection, that a Liberal can see.


----------



## Rusty O'Toole (Feb 1, 2012)

Deficits are wonderful when you are living it up on borrowed money. Not so hot when it comes time to pay the money back, or suffer the results of inflation and wonky monetary policy.

Or as the old drug addict said 'it's not the drugs that hurt. It's doing without that hurts'.


----------

