The Conservative Spending Spree

[jdobbin]

Programme spending is not all that counts.

There is a higher cost when the budget is in deficit to increasing programme spending than there is when the budget is in surplus. The higher cost of borrowing and a worsening credit rating which increases the cost of borrowing even more.

Coyne's graph also points out jumps in spending during minority Governments. 72-74, 79-80, 2005 etc...

Is Harper spending more than what a lot of people would like? Absolutely.

Is he spending it in sorely needed areas, i.e. our military among others? Absolutely.

Do they have to spend more than a lot of the hardliners would like because they are in a minority? Absolutely.

Your point is fair and valid. IIRC you supported the changes the Government offered to the Atlantic Accord. That's in line with keeping spending down and shows ideological consistency.

dobbin's only point is to attack the Government no matter what they do. There is no consistency. No fairness.

What you read into his ad nauseum attacks was what you like and agree with. It doesn't come across as his intent if you look at the totality of his posts.

You just defend the policy of spending ad nauseum. It is very consistent. There isn't a announcement that you haven't agreed with. It is all needed absolutely. There isn't one penny more being spent that shouldn't be.

Coyne does point out Liberal spending. And then he points out Harper's spending in astoundment! You then say, oh well, it doesn't matter, it is in his blog. But he repeats the same information in his National Post column. What next? Oh, it doesn't matter. He is secretly a Liberal.

I'm of the opinion that we are not really seeing any fiscal conservatives posting in this thread.

[Michael Bluth]

Programme is all that counts.

I don't know if I want to get involved in this debate again.

If you actually want to debate address the rationale I gave for why programme spending isn't all that counts.

Do you dispute the arguments around the different net fiscal impacts of programme spending in a surplus budget as opposed to a deficit budget?

That was a very valid point. If you want to debate rebut the argument, don't just ignore it.

[sharkman]

Your statement was still wrong since it made no connection to the link. I don't bother to read many of your links or the links of some other left wingers since I know of the biases involved. Like I said, Harper will have to spend for many years to outdo the spending of Trudeau. Further, with record budgets, I'm not surprised to have spending up. Haven't you heard that the Tories are down in the polls? Spending is usually what a party does in such a position.

It's your loss if you won't open your eyes to an article by Andrew Coyne, and to Harper's fiscal policies.

Dobbin's point is correct. In absolute terms of constant dollars and on an annual basis, Harper is spending more than Trudeau did.

Moreover, Harper has increased spending faster than economic growth in Canada and his projected spending is also increasing.

You say that this is "politics as usual"but I, for one, voted for Harper primarily because I want government to spend less. It may be true that Harper has made the political calculation that the NDP/Liberals and BQ would be even more spendthrift. I don't care about that and neither should Harper. I have the option of not voting at all.

It is apparent that in the summer session of parliament, the Tories have embarked on a strategy. Whether you like it or not, many liberals want the government to take care of every detail of their lives. Perhaps this spending is an attempt to give it to them in spades, I don't know.

A big chunk of money is being spent on military toys. That's like a guy showing up with a new digital camera, a new Hummer and a widescreen TV. What's the wife going to say?

Harper has a long way to go to outspend PET. In another year the revenues may change and a resulting change in the budget could wipe out your concerns August, although not dobbin's. I understand the point, but I think in real terms it's a biased way of looking at it. But to each their own.

It seems you also have a bone to pick with military spending, which was drastically cut and for a decade our military has had to work with worsening toys which put them at greater risk, such as transports that break down and have light weight armour that can be pierced with a sling shot. As well the Sea Kings continue to be a national embarrassment. But again, since that obviously doesn't bother you, perhaps the slash burn of our military done by Chretien doesn't either. But I think the 'wife' would be happy to know that the Canadian government is now taking better care of her husband.

In the long term, I would be concerned with spending if it continues at this pace, but so many variables come into place, it's kind of like expecting that Chretien was actually going to rebuild the transcanada highway when news reports came out saying he would to leave a legacy of his reign. The potholes are getting bigger.

Edited July 22, 2007 by sharkman

[August1991]

Harper has a long way to go to outspend PET. In another year the revenues may change and a resulting change in the budget could wipe out your concerns August, although not dobbin's. I understand the point, but I think in real terms it's a biased way of looking at it. But to each their own.

I'll repeat again the data linked above.

Harper is spending more in real terms on an annual basis than Trudeau ever spent. Harper is also spending more as a percentage of GDP than Trudeau spent. Furthermore, Harper is not showing any sign of controlling spending but instead it seems forecast spending will increase.

I did not vote for such a government.

It seems you also have a bone to pick with military spending, which was drastically cut and for a decade our military has had to work with worsening toys which put them at greater risk, such as transports that break down and have light weight armour that can be pierced with a sling shot. As well the Sea Kings continue to be a national embarrassment. But again, since that obviously doesn't bother you, perhaps the slash burn of our military done by Chretien doesn't either. But I think the 'wife' would be happy to know that the Canadian government is now taking better care of her husband.

If Harper wants to buy the digital camera, fine. But we can't also buy the leather sofa.

IOW, where are the cuts in the budget to make room for military spending?

It is very, very hard to stop the bureaucrats from spending more money. It appears that Harper doesn't have the fortitude to do it. I don't buy the argument that this is a minority government and it has no choice.

If you actually want to debate address the rationale I gave for why programme spending isn't all that counts.

Do you dispute the arguments around the different net fiscal impacts of programme spending in a surplus budget as opposed to a deficit budget?

That was a very valid point. If you want to debate rebut the argument, don't just ignore it.

That's precisely what I dispute.

IMO, the fiscal position (surplus/deficit) of the federal government is largely irrelevant. (The relevance arises if the federal budget were to become an unstable Ponzi scheme - certainly not the case now.)

IOW, it doesn't matter (with that one caveat) how the government pays for its purchases - whether through taxes and a balanced budget or through borrowing and a budget deficit. It certainly does matter what the government buys though.

In this, the government's situation is entirely unlike my or your personal situation. I think the confusion stems from the fact that the government is spending other people's money. That's why I gave the example of Bill Gates.

Imagine you were spending Bill Gates' money. Would it matter whether you used his credit card or his debit card? (To carry the analogy further, imagine that Gates' credit card had an interest rate of about 4% annually since that's the rate at which the federal government now borrows.)

So, please don't misunderstand me. I'm not saying that federal government spending doesn't matter. It does.

[Michael Bluth]

IMO, the fiscal position (surplus/deficit) of the federal government is largely irrelevant. (The relevance arises if the federal budget were to become an unstable Ponzi scheme - certainly not the case now.)

You really need to explain that caveat.

I don't quite understand how a Government budget could become a Ponzi scheme what that has to do with overall spending versus program spending.

[geoffrey]

IMO, the fiscal position (surplus/deficit) of the federal government is largely irrelevant. (The relevance arises if the federal budget were to become an unstable Ponzi scheme - certainly not the case now.)

You really need to explain that caveat.

I don't quite understand how a Government budget could become a Ponzi scheme what that has to do with overall spending versus program spending.

The government either borrows through bonds or borrows through taxpayer's mortgages on their houses. The taxpayer pays more interest on a mortgage than the government does on a bond. Balanced budgets are largely irrelevant.

Poor spending habits though, do make a difference in an economy. Government funding of them really doesn't matter.

Edited July 22, 2007 by geoffrey

[Michael Bluth]

The government either borrows through bonds or borrows through taxpayer's mortgages on their houses. The taxpayer pays more interest on a mortgage than the government does on a bond. Balanced budgets are largely irrelevant.

Poor spending habits though, do make a difference in an economy. Government funding of them really doesn't matter.

What?

The funding of them matters because it effects the cost of debt repayment.

When spending is funded from revenues that leaves excess revenues to pay down debt. This leads to the debt going down, a positive effect on the credit rating, thereby lowering the cost of financing.

When spending is funded from financing that leaves no money to the debt increasing. Hurting the credit rating, thereby increasing the cost of financing.

[geoffrey]

What?

The funding of them matters because it effects the cost of debt repayment.

Not really. Our mortgages cost more than government bonds. It makes more sense for the government to borrow than for us to borrow to pay our taxes (we pay less towards our mortgages because we pay more in taxes).

When spending is funded from revenues that leaves excess revenues to pay down debt. This leads to the debt going down, a positive effect on the credit rating, thereby lowering the cost of financing.

Credit rating is unimportant when dealing with national governments, most of the time. Government bonds are the benchmark AAA rating of which other debt is ranked against domestically. They are the benchmark. So how can we make it cheaper than the lowest benchmark rate?

You'll find people are still more eager to lend the US government money than Canada's because of cash flow, not because of accumulated debt as a percentage of GDP.

When spending is funded from financing that leaves no money to the debt increasing. Hurting the credit rating, thereby increasing the cost of financing.

I disagree. See above. Would you rather have the country pay 3.5% or you pay 7.5%? In Canada, we are now chosing to pay 7.5%.

[Michael Bluth]

Credit rating is unimportant when dealing with national governments, most of the time. Government bonds are the benchmark AAA rating of which other debt is ranked against domestically. They are the benchmark. So how can we make it cheaper than the lowest benchmark rate?

I disagree. See above. Would you rather have the country pay 3.5% or you pay 7.5%? In Canada, we are now chosing to pay 7.5%.

Government is not guaranteed a AAA rating.

The Canadian Government lost its AAA rating in the 90s. It took until December of 2002 to get it back. Link

Canadians aren't making the choice as you position it. Pure rationality is not the order of the day. The Conservative tax cuts put more money into the hands of all taxpayers. How many taxpayers do you know who took all the money they kept in their pockets as extra payments on their mortgages? The purely rational actors in your choice would have done so.

[geoffrey]

The Conservative tax cuts put more money into the hands of all taxpayers. How many taxpayers do you know who took all the money they kept in their pockets as extra payments on their mortgages? The purely rational actors in your choice would have done so.

Who cares? That money went towards things they would have borrowed for anyways. At least thats the logic you apply to the government spending.

By the way, the government increased it's revenue faster than economic growth. The Conservative tax cuts did not put any more money in the hands of Canadians, our overall burden as a percentage of the economy has increased considerably.

[Michael Bluth]

Who cares? That money went towards things they would have borrowed for anyways. At least thats the logic you apply to the government spending.

By the way, the government increased it's revenue faster than economic growth. The Conservative tax cuts did not put any more money in the hands of Canadians, our overall burden as a percentage of the economy has increased considerably.

That's not my logic in any way shape or form. How do you kn ow what the Government would have done if the fiscal situation were different?

So what did the tax cuts do? Did it take money out of taxpayers hands? Keep it there instead of taking it out.

Your macro view of Government spending just doesn't hold up. The analogy between Government debt and mortgage payments is utterly false.

[August1991]

Government is not guaranteed a AAA rating.

The Canadian Government lost its AAA rating in the 90s. It took until December of 2002 to get it back. Link

That link refers to foreign currency denominated paper issued by the federal government - not borrowing in Canadian dollars. In any case, the federal government's rating is far better than yours or mine for the simple reason that the federal government can put someone in prison if they don't pay taxes. Lenders love such conditions.

[Michael Bluth]

That link refers to foreign currency denominated paper issued by the federal government - not borrowing in Canadian dollars. In any case, the federal government's rating is far better than yours or mine for the simple reason that the federal government can put someone in prison if they don't pay taxes. Lenders love such conditions.

Foreign currency denominated paper is the key in this case. If that isn't what Geoff was referring to it was definitely off-base.

The credit rating on foreign currency denominated paper is the key. Still efffects the cost of all Government borrowing. The option for the Government to obtain debt at a lower level in foreign markets is the competitive factor which governs what the government pays for debt domestically.

Government spending in deficit situations can lead to future borrowings costing more

[August1991]

Foreign currency denominated paper is the key in this case. If that isn't what Geoff was referring to it was definitely off-base.

Why is this key? Who cares what currency the government borrows in - with the possible difference that the government could inflate away its Canadian dollar debt.

Michael, the government is different from you and me. It is probably wise advise for an individual to borrow only when necessary and over time, to pay off any debts. Individuals should live within their means.

Such advice is meaningless for a government and it is not helpful at all in encouraging governments to do what people want them to do. IMV, such advice shows the stark divide between the true nature of this institution of government and people's perceptions of it.

People do understand the institution of marriage, and that's a closer approximation to government. When a couple marry, they are responsible for the debts of the other but they also share any assets. This is particularly apparent in the case of divorce.

The federal government is like an ex-wife with power to set alimony at whatever she wants. In such a situation, it is irrelevant to talk about her debt situation. If she needs more money, she'll just increase the alimony her ex-husband has to pay. What the ex-husband wants is to limit his ex-wife's ability to spend in his name. IOW, we want to limit what governments buy.

It's as if the ex-wife is saying that she's living within her means because she is only using the ex-husband's debit card and never uses the ex-husband's credit card. Indeed, Michael, you seem to think that this is evidence of her smart financial abilities.

Now then, the credit card or bank accounts can be denominated in US $, yen or bongo-bongos but that changes nothing in the basic situation.

[This analogy is too simplistic. The awful truth is that the situation of government is even worse. The ex-wife is presumably spending money for herself. The government is an agent spending money for other people.]

Edited July 23, 2007 by August1991

[Riverwind]

Why is this key? Who cares what currency the government borrows in - with the possible difference that the government could inflate away its Canadian dollar debt.

There is a HUGE difference because the government can only collect taxes in its own currency. This means if the currency falls the burden of repaying that debt is much higher. The cost of paying interest on the debt could cripple a country financially if the foreign debt is large enough and the currency drops far enough. Edited July 23, 2007 by Riverwind

[Michael Bluth]

There is a HUGE difference because the government can only collect taxes in its own currency. This means if the currency falls the burden of repaying that debt is much higher. The cost of paying interest on the debt could cripple a country financially if the foreign debt is large enough and the currency drops far enough.

Yet another reason consequence of the difference between programme funding in a deficit situation as opposed to a surplus situation.

[geoffrey]

That is a nearly impossible situation Riverwind. Heavy borrowing to the point where that would be an issue shortens the supply of loanable C$'s and would drive interest rates up, not down.

Anyways, if the debt is denominated in Canadian currency (as much of our debt is), then the value of the canuck buck really is irrelevant.

[Riverwind]

That is a nearly impossible situation Riverwind. Heavy borrowing to the point where that would be an issue shortens the supply of loanable C$'s and would drive interest rates up, not down.

I don't see your point. Rising interest rates is simply one of the reasons why government debt much be managed carefully. If a government borrows too much it causes interest rates to rise for everyone which does hurt the economy more than the government spending will help it. However, increasing interest rates will not necessarily prevent a rapid drop in the currency if there is a loss of confidence amoung foreign buyers.

Anyways, if the debt is denominated in Canadian currency (as much of our debt is), then the value of the canuck buck really is irrelevant.

That is my point. Foreign currency debt exposes the citizens to a risk of a currency shock. It is a risk that no responsible government should take. If it cannot fund its debt with debt denomonited in its own currency (i.e. no buyers) then it should cut programs. Edited July 23, 2007 by Riverwind

[jdobbin]

Latest on CTV. The calculation now is that military spending is seeing the biggest increase since World War II.

http://www.ctv.ca/servlet/ArticleNews/stor...21?hub=Politics

It's part of a multi-billion dollar spending spree to create a Canadian Forces that can land a mighty punch.

"It's my list: Restoring ships, Arctic ships and frigates and airplanes and trucks," Defence Minister Gordon O'Connor said earlier this week.

The list also includes tanks, jumbo aircraft, frigate upgrades, new troop carriers, heavy-lift helicopters and new airbases.

The total cost so far is more than $22 billion, which doesn't include the billions more for operations and maintenance.

It's the biggest build-up since the Second World War.

"There has been no other time since then that we have had such a concentrated way in a new generation of weapons, a new generation of equipment," said military analyst Col. (ret'd) Michel Drapeau.

The Conservative government is buying enough hardware to support a military much larger than the current force of 64,000.

"The equipment we are buying is capable of supporting a force twice the size," Drapeau said.

I don't think we have seen the last of the military announcements either.

[Riverwind]

Latest on CTV. The calculation now is that military spending is seeing the biggest increase since World War II.

That is because the military needs to money to make up for 60 years of neglect by adminstrations of all stripes.

[Michael Bluth]

Anyways, if the debt is denominated in Canadian currency (as much of our debt is), then the value of the canuck buck really is irrelevant.

Uhhhh, the value of the Canadian dollar has many, many effecs on our economy. It is never irrelevant.

[geoffrey]

Anyways, if the debt is denominated in Canadian currency (as much of our debt is), then the value of the canuck buck really is irrelevant.

Uhhhh, the value of the Canadian dollar has many, many effecs on our economy. It is never irrelevant.

It's irrelevant when we're talking about paying Canadian denominated debt with Canadian dollars. The macro-effects on the economy are really not huge, as we've seen over the last few years. Some areas have suffered. Canada just keep trucking along though.

[jdobbin]

That is because the military needs to money to make up for 60 years of neglect by adminstrations of all stripes.

For a force twice the size of the one now?

[Canuck E Stan]

That is because the military needs to money to make up for 60 years of neglect by adminstrations of all stripes.

For a force twice the size of the one now?

Considering the population has doubled in the last 60 years, and presently Canada has only 64,000 soldiers protecting some 36 million people, even doubling doesn't seem enough.

Canada's population history

[jdobbin]

Considering the population has doubled in the last 60 years, and presently Canada has only 64,000 soldiers protecting some 36 million people, even doubling doesn't seem enough.

Canada's population history

So you figure that O'Connor will be announcing a doubling of military numbers in the next while? How much do you think that will cost?