Wednesday, February 04, 2009

Everything is Back to Normal

Now that the budget has passed, it appears things are moving back to normal. The best indication has been how quickly conservative commentators have been to criticise the budget. The National Post didn't pull any punches in their editorial:

As we’ve noted in recent days, all bricks-and-mortar stimulus programs are inherently problematic from an economic point of view: Injecting cash into public works and private projects involves picking winners and imagining the future; and for a variety of reasons well-understood by any student of Adam Smith, governments usually botch that job. But at least much of Mr. Flaherty’s extra infrastructure money is being focussed on projects that Canada may actually need — bridges, roads, schools and the like. In this sense, Mr. Flaherty’s blueprint compares favourably to the current legislative incarnation of the more scattershot U.S. stimulus package, described by New York Times columnist David Brooks in recent days as “a muddled mixture of short-term stimulus haste and long-term spending commitments.”

The attention being given to “social housing” by Mr. Flaherty, on the other hand, should raise red flags among fiscal hawks. Housing expenditures will raise the cost of labour in the short term for more immediately productive enterprises. Moreover, social housing has a long history of unexpectedly turning into a black hole for unwary governments — the white-elephant Vancouver Olympic Village being just the latest
example. And it doesn’t make much sense to hand cash to first-time homebuyers while simultaneously stimulating the real estate market — thereby making it more
expensive for them to buy that first home.

Good for them, it's time for voices of reason to weigh in and add balance to the debate. Government by hysteria will leave a big hangover long after the money's been spent.

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