Deficit financing

krazy kanuck · January 16, 2009

Will government spending help get us out of depression or just make a bad situation much worse?? :unsure: :rolleyes:

Moonbox · January 16, 2009

It depends. Long term infrastructure is probably a little late to make any difference.

We need things that will infuse cash in the short term. Things that can start yesterday.

Huston · January 16, 2009

Will government spending help get us out of depression or just make a bad situation much worse??

No, government spending will make people think it is not their problem. What we need to the government to get out of the way and live within our means. If that require substantially lower property costs and goods and wages, then so be it. If there is absolutely no way oil can be remove from the tar sands with lower prices, well, other solutions must be made. The government can only create desk jobs and waste money. People should focus more on their local economies. Find ways to live with less money. Farmers markets, public transit, local breweries schools and professionals. They say don’t play with fire.. well lets take that torch of liberty back in our own hands. If you want the centralize power of the government hold onto that torch and bring you things for your service base economy then so be it, but don't make it the dictatorship of the majority. Go try an live in your expensive houses, expensive car, and expensive lifestyles that result from needing to take you time driving to and from work or to the grocery store or various other takes like expensive labels.

Yes, it is all a lifestyle choice, and the very few who don't like it are forced to use it (from lack of choice or opportunities) and pay for it (through the government).

Edited January 16, 2009 by Huston

Huston · January 16, 2009

It depends. Long term infrastructure is probably a little late to make any difference.

What would infrastructure do anyways? That is not the problem. I guess you have been listening to Obama too much, or the bunch of other incompetent fools who have taken that bad advice going around lately. This is a money problem that will result in further consolidation of banking power to the few.

We need things that will infuse cash in the short term. Things that can start yesterday.

Oh, and that will do what exactly? It will only centralize industrial power to the few.

Man I dislike the Prometheus myth.

Wilber · January 16, 2009

If we are going to go into hock it should be for things that have a lasting value to the economy and country in general. Infrastructure is such a thing and unless we are talking about mega projects, quite a bit can be started in fairly short order such as replacing a lot of existing infrastructure that is long past its best before date..

Huston · January 16, 2009

If we are going to go into hock it should be for things that have a lasting value to the economy and country in general. Infrastructure is such a thing and unless we are talking about mega projects, quite a bit can be started in fairly short order such as replacing a lot of existing infrastructure that is long past its best before date..

... and what would this infrastructure be for, exactly? That does not create real sustainable jobs, as it would only be short term jobs, and then how would that be paid off?

The infrastructure word is meaningless.

August1991 · January 16, 2009

Will government spending help get us out of depression or just make a bad situation much worse??

In the basic Keynesian macroeconomic model, there are two policies available when aggregate demand falls. (And make no mistake, teh fall in stock market and house prices have made many Americans feel poorer and so they are buy ing less. In turn, this affects Canada because we sell so much to them.)

To buttress aggregate demand, first of all, the US Fed (and Bank of Canada) can increase the money supply. They signal this by lowering interest rates. The US Fed has done this and many economists feel that this alone may be enough.

Secondly, governments can directly increase aggregate demand by borrowing money and then either buying stuff from people/hiring people to do stuff (increased government spending) or giving the money back to people through tax cuts.

Incidentally, we are not in a depression. Canada's unemployment rate is still very low and no one is predicting that it will rise above 10%.

-----

For myself, I favour the current monetary policy and a tax cut. We have enough government bureaucrats and make-work schemes. We don't need more. Hiring someone to dig holes in the ground may increase GDP but it won't make Canada a richer country.

Riverwind · January 16, 2009

For myself, I favour the current monetary policy and a tax cut. We have enough government bureaucrats and make-work schemes. We don't need more. Hiring someone to dig holes in the ground may increase GDP but it won't make Canada a richer country.

I just saw this:

http://sciencepolicy.colorado.edu/promethe...nt-writing-4885

Sounds like the Obama administration thinks that enforced spending on scientific R&D can provide economic stimulus.

The bill requires nearly all of the funding to be awarded within 120 days of when the President signs the bill into law, with staggered deadlines of 30 days for formula funds, 90 days for competitive grants, and 120 days for competitive grants in brand-new programs, with the intention of spending the funding as quickly as possible to provide immediate economic stimulus.

Any bets that most of the money is wasted and would have been better spend as a lottery that handed out cash prizes to random people?

Edited January 16, 2009 by Riverwind

Oleg Bach · January 17, 2009

With deficit spending the government is actually taking out a loan form the average Canadian tax payer - then the government will harrass those that do not pay up in full....much like massive banking bail outs..you take money from the public and lend it back to them at an interest. People forget that they are the government...and if the government over spent and needs to run up a debt to save face and keep the system going - then the people had better realize that their hired managers are not doing a good job ----and I don't care about the idea that this is a global phenomena - some how our banks have stayed in tact..because of sheer cheapness and prided hoarding....maybe the banks should kick in a few bucks - but I doubt that they will part with any lucre.

madmax · January 17, 2009

I want to know why the Federal Government is running a 14Billion Dollar deficit before we even get to laying out a deficit spending plan.

This isn't like we have a surplus and are going to use it up and then gamble on deficit spending.

This Government, the CPC haven't shown the fiscal management to run a balanced budget.

Why should I trust them wild deficit spending?

DFCaper · January 17, 2009

This Government, the CPC haven't shown the fiscal management to run a balanced budget.
Why should I trust them wild deficit spending?

I no longer see strong fiscal management as being part of a Conservative Gov't. Mulroney, Harper and Bush convinced me of this. I see infrastructure spending that I've heard about as a subsidy (bailout) to people who work in the construction industry...

I would like to see some infrastructural spending on clean energy. The business cases for such spending rarely make sense, but after the money is wasted, they tend to be cheaper to upkeep than coal.

I am not a fan neither of huge deficits. A little too risky. Over spending got us here… will it get us out?? It’s tough to payoff the money you borrow has been my experience.

Also, wasn’t our government being fiscally responsible help our economy in the last 10 years?

Spend money towards EI, with the US being as screwed up as they are, we are going to have to wait for them to get on there feet again, then we will be good again. Weather the storm, not fight it. It’s not the fundamentals of our economy are screwed up, it’s our customers.

Jerry J. Fortin · January 17, 2009

Trying to spend your way out of debt is an unreasonable and illogical solution to the problem of recession. Infrastructure development makes sense in terms of nation building, but in terms of ending a recession it is lacking any kind of sense whatsoever.

I do however advocate infrastructure programs, yet they must be focused in order to provide both benefit to the economy and return on investment to the tax payer.

eyeball · January 17, 2009

This Government, the CPC haven't shown the fiscal management to run a balanced budget.
Why should I trust them wild deficit spending?

Because they promised to get rid of the gun registry, homo marriages and crack down and get tough and other real important stuff. Besides which there's some real buying opportunities out there these days.

Wilber · January 17, 2009

... and what would this infrastructure be for, exactly? That does not create real sustainable jobs, as it would only be short term jobs, and then how would that be paid off?
The infrastructure word is meaningless.

Roads, sewers, water mains, bridges and the like that are falling apart because they should have been replaced years ago. They will have to be fixed sometime. Could be a lot of things but if they are going to put me farther in debt, I want it spent on something that will bring lasting value to the country, something that is actually worth going into debt for, not just make work projects.

bytown · January 17, 2009

wilber, i agree with you. what better time is there to replace/repair disintegrating infrastructure than during an economic slowdown? the benefits besides putting people to work are the availability of manpower/equipment and lower construction material costs. as a rule i'm against deficit financing, but in the case of repairs that have to be made we may as well do it now.

Huston · January 17, 2009

Roads, sewers, water mains, bridges and the like that are falling apart because they should have been replaced years ago. They will have to be fixed sometime. Could be a lot of things but if they are going to put me farther in debt, I want it spent on something that will bring lasting value to the country, something that is actually worth going into debt for, not just make work projects.

This couldn't have happened when we were not in debt?

If the infrastructure is implemented so that we don't need to rely of the government, or fine, but it is not possible in any way.

Still don't understand the infrastructure bit.

Jerry J. Fortin · January 17, 2009

This couldn't have happened when we were not in debt?
If the infrastructure is implemented so that we don't need to rely of the government, or fine, but it is not possible in any way.

Still don't understand the infrastructure bit.

For starters, I would not be in favour of sewer upgrades or construction, that is a municipal responsibility. Roads and bridges that are part of the Trans-Canada system are another matter, but I don't think that is the big bang for the buck either. Federal dollars need to be spent on national programs to avoid the perception that any single district or locality is receiving a disproportional amount of investment. To that end, there are few opportunities that exist which can provide the needed employment and yet produce any revenue. Things like energy production, as in wind and solar power systems make sense because they will provide power which is a necessity in this nation. Perhaps tidal power on the coastal regions makes more sense for them. Perhaps hydro power for inland areas makes more sense for them. At any rate energy is a prime consideration in terms of return on investment.

The simple fact of the matter is that there can and should be spinoffs from the efforts. With all due respect folks, there is no magic bullet.

jdobbin · January 17, 2009

For starters, I would not be in favour of sewer upgrades or construction, that is a municipal responsibility. Roads and bridges that are part of the Trans-Canada system are another matter, but I don't think that is the big bang for the buck either. Federal dollars need to be spent on national programs to avoid the perception that any single district or locality is receiving a disproportional amount of investment.

There is no infrastructure building that falls within federal responsibility. Financing of projects can and does fall within the framework of transfer payments.

Wilber · January 17, 2009

Problem is, the Federal government collects the majority of the tax revenue in this country, yet the municipalities who provide most of the infrastructure and services we use on a daily basis have the least options when it comes to raising revenue. In BC an average of 80% of municipal revenues come from property taxes and user fees. Only 7.4% comes from transfers. They really are behind the eight ball when it comes to collecting revenues compared to other levels of government. I don't imagine the rest of the country is much different. Why not help them out a bit.

Nothing wrong with some projects like alternate energy as long as they are economically viable, otherwise we will have to continue subsidizing them long after they are completed. By nature however they will by themselves result in disproportional investment. Wind, solar and tidal are best suited to certain regions, mostly the prairies and the coasts depending on which ones. Building them where they are not best suited will be a waste of money. This is going to take a lot of thought or at least it should, otherwise we are likely to throw a ton of money at things which won't produce much value.

Huston · January 18, 2009

The simple fact of the matter is that there can and should be spinoffs from the efforts.

A so speculation! Unfortunately, the problem is not about infrastructure, unless it is to decentralized power.

With all due respect folks, there is no magic bullet.

Of course, and that is why the government should not do anything, or be expected to. We are just asking for problems from the bubble. Which would be anouther bubble, just like every other form of bubble the Government created. Even if the infrastructure went to ethanol (possibly, but is a big mistake), solar, wind, and whatever. That does not do anything for the economy/ So that bubble will burst until people realise the financing, liberal arts, and fun are not sustainable in how we run them today, which is tourism and service. People just expect too much money for those services. It is said by Austrian economists say that we live beyond our means and burden the rest of the world. This is the whole service base "western" economy, and growing service base economies in otherplaces, like Dubai.

Of of this has been a specualtive bubble, that came with the baby boomer population. It is like building infrastructure without the industries to use it. The economy is not suffering from the infrastructure now. It is a financial mess. Pumping money into it will only inflat the currency, to get it going the way it is of the fake 3% GDP growth every year. That number doesn't mean anything. NetDP might say more., perhaps, look at Germany. They are smart with their money. Although they may have caved... I'll have to check into that again. I forgot about the Germans.

Jerry J. Fortin · January 18, 2009

Traditional infrastructure is in fact not a federal undertaking. I do however advocate a federal undertaking in this regard. Crown corporations designed and created as non-profit organizations to first of all provide a needed service and secondly to repay the public investment in its creation. One of the few areas where this can work is in a "green effort" to provide alternative energy sources for consumers.

For starters, the government should be looking at providing tax incentives for combined heat and power sources for residential use. It should follow that up with further incentives for residential production of alternative energy, paying for the cost of reverse meters. In addition the government should encourage the use of geothermal energy and provide tax breaks for retrofitting existing homes and the creation of new homes.

Do you folks see the focus here, citizens instead of business, because the citizens are the largest demographic and that is where the biggest bang for the buck can take place. Reducing consumption and providing alternative energy on a larger scale at the same time. That is where the government should be headed with any kind of focus at all.

To return to infrastructure and alternative energy; on a much larger scale the federal government should be considering utilizing the production of alternative energy to power an enhanced transportation system that was designed to move "people" at higher speeds and at less unit cost per mile traveled. Public transportation on a much larger scale than previously considered, a national transportation network of "green" design.

The spinoffs that I was referring to are these kind of things. Not merely the production of energy, although that should be the focus simply because it is the one thing that we ALL use and it is the one thing that all of us would benefit from. It is the value added manufacturing of energy and transportation systems that would serve to provide the employment of citizens while providing needed services that is required. There needs to be considerable thought put into the effort, of that there is no doubt, and yet there doesn't seem to be much thought put into stimulus packages beyond corporate welfare.

The government needs to provide leadership, its needs to become innovative, it needs to push the limits of our abilities because that is how we adapt and overcome our problems. We need challengers in order to achieve a higher level of civilization. The net effort of government needs to focus on a higher ideal of improving the human condition. This challenge before us, the recession, is actually an opportunity to be embraced, not a thing to be feared. The utter collapse of the world economy and the shifting political demographics are providing an avenue of exploration for us that we truly need to welcome with open arms.

Mr.Canada · January 18, 2009

Recession is the time to invest in infrastructure. History has proven this. Now is the time. It serves three purposes. It improves our crumbling infrastructure and it provides employment for the under and unemployed Canadians and it boosts Canadian economy as Canadians will be spending more ans they'll be making more.

It is a great thing for everybody.

punked · January 18, 2009

Recession is the time to invest in infrastructure. History has proven this. Now is the time. It serves three purposes. It improves our crumbling infrastructure and it provides employment for the under and unemployed Canadians and it boosts Canadian economy as Canadians will be spending more ans they'll be making more.
It is a great thing for everybody.

It sure is too bad our lazy good for nothing government wont get the infrastructure spending in until we our out of the recession eh? The time was 6 months when Harper was telling us we would all be ok and everyone else was saying lets do something.

Mr.Canada · January 18, 2009

It sure is too bad our lazy good for nothing government wont get the infrastructure spending in until we our out of the recession eh? The time was 6 months when Harper was telling us we would all be ok and everyone else was saying lets do something.

I doubt you even have a job so it doesn't matter we're in recession or not punked does it? There is no need to panic needlessly. We must be prudent when talking about Billions of dollars. It isn't something that must be decided by knee jerk reactions. Dion and Layton wanted to spend Billions before we even heard what the Americans are going to do. These are American companies for crying out loud.

whowhere · January 18, 2009

Recession is the time to invest in infrastructure. History has proven this. Now is the time. It serves three purposes. It improves our crumbling infrastructure and it provides employment for the under and unemployed Canadians and it boosts Canadian economy as Canadians will be spending more ans they'll be making more.
It is a great thing for everybody.

Infrastructure spending is luxury spending, so NO NO NO!. In Recessions its time to cut Government spending, decrease taxes and grant tax credits to encourage business risks. After the recession is over then it will be time to look at infrastructure. Working on Infrastructure makes as much sense as building a deck in the backyard of a house. Nice, but not needed when you are risk of losing your home to foreclosure.

In times of recessions politicians have to reevaluate Law and order. Recessions and depression is about Corruption to the Highest level. Harpers and his conservatives are a corrupt party and have revealed their uselessness in navigating Canada to prosperity.

What is lost on People about the financial Crisis is that China has 1.3 Trillion in US treasury Bills. The US is slowly moving their interest rate to Zero and possibly to negative return. China wants its money. The US doesn't have it. To resolve it, the US will hand over to China 1.3 trillion printed US dollars. This increase in money supply in theory would cause hyper inflation. Look at Zimbawai. 1 million percent inflation in one year. Will this happen to the US? The fact is, the US has effed the world over before in this fashion and they are trying it again.

What is different between now and the depression of the 30's

Main stream News media

Leaps and efficiencies in Technology

and a European Union as an Alternate World Curency

The US is about to be fired off of the world stage. They have lost the respect of the world and the world will move towards the Euro as their safe haven currency.

We will not head to any depression. If anything we will head into an era of martial law. Guns will be pointed at people to motivate them to not eff around and pull their weight. There are alot of measures over the history of the US they have enacted to defend themselves. One of those measures was the conscription of citizens into military service to get government work done.

Recessions and depression is more about corruption than about economics. In times of recessions and depression political leaders have to grab the bull by the horns and tighten rules and regulation and cut government spending. Any resistance to righting the coarse will have to be met with the full force of its Militiary and Civilian power.

Welcome to Robocop America.