Thursday, April 16, 2009

Consequences for Crazy Spending

“We will have to raise taxes,” Michael Ignatieff said yesterday. So the aggressive stimulus package that the threatened liberal led coalition was pushing for is going to come with costs. Glad we're finally admitting that now. It was the Liberals and NDP that were selling panic and holding the government hostage for an expensive stimulus package, it's only a few months later and now they're talking about how to pay for it. Better late then never I suppose.

Still, I take it as another good sign for the economy that political discourse in this country is changing from the impact of total economic collapse to what to do when the economy recovers. It's true that the deficit can only be eliminated by economic growth, lower spending, or higher taxes. I think that's the best order, apparently Mr. Ignatieff disagrees.

If our economy is to have a sustained recovery - we can't simply bash it into submission once the crisis is confirmed to have passed. The government has a deficit position because of negative economic growth and the new 'temporary' spending in the stimulus package. So the deficit should be eliminated by rebounding growth and removing the recent spending increases. Ignatieff is wrong - higher taxes are not and should not be a certain consequence of the last budget.

Still it's good to hear people talking about these consequences. I hope they start having similar conversations in the US administration.

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