Deficit of policy comes home to roost
Winnipeg Free Press, November 19
British economist Lord John Maynard Keynes believed that governments should step in when markets fail and deficit spend to maintain employment and incomes and thus, the economy.
In Time magazine’s The Time 100 millenium series, former U.S. secretary of labour and economist Robert B. Reich wrote this about Keynes’ legacy:
“His radical ideas that governments should spend money they don’t have may have saved capitalism.”
This has been apostasy of the highest order since neo-conservatism became the established church of economic thought 30 years ago with the rise to power of Margaret Thatcher in Britain and Ronald Reagan in the U.S.
The chickens of three decades of ever-more deregulation, ever-more let ‘er rip cowboy capitalism, yee-haw free markets and cut, cut, cut tax cuts have finally come home to roost.
Now, even one of the high priests of neo-con economics, Prime Minister Stephen Harper, is being dragged, grudgingly, into agreeing that maybe, perhaps, a tiny, short-lived deficit might be necessary. And, perish the thought, there might be greater need for government oversight and regulation of the free market’s omnipotent, but now shockingly greedy, invisible hand.
At the close of the Group of 20 leaders’ summit, Harper said Canada hopes to preserve its balanced budget, but is prepared to use fiscal stimulus if necessary to do its share on the world stage.
“Look, if there’s worldwide agreement, then we will engage in sufficient stimulus to do our part in carrying global economic demand. We will fulfil our part,” Harper said.
“What we’ve got to be sure is that if we do short-term deficit spending as a deliberate policy — if we do that, we haven’t settled on doing that, but if we do that — we will have to be able to demonstrate to Canadians that those deficits will genuinely be short-term and cyclical, and we will come out of them quickly.”
What group of Canadians is the prime minister eager to please? Certainly not the tens of thousands of homeless Canadians already sleeping on the streets or living in garden sheds and bug-infested public housing.
Or, the hundreds of thousands of Canadians newly or about to be unemployed wondering if their companies and jobs are gone for good.
Or, the hundreds of thousands of already-unemployed manufacturing workers who, thanks to Canada’s savage cuts to balance the books in the 1990s, are now without any form of unemployment insurance and reliant on deeply inadequate provincial welfare to survive.
These Canadians aren’t worrying about deficits. They’re worrying about paying their mortgages or rent, about buying food and clothing for their children — in other words, about survival. The last thing on their minds is obeying economic dogma.
Unless the prime minister thinks the only Canadians who count are the well-heeled, he shouldn’t fret at all. No one else will be coming after him because of a deficit — particularly since he frittered away $12 billion a year in GST cuts whose main objective wasn’t to put pennies in people’s pockets but to strangle the ability of the federal government to address the basic needs of its citizens.
Today’s Canadian workers have less protection under the cruelly misnamed “employment insurance” than since the scheme was founded; less, even, than American workers.
Prior to the North American Free Trade Agreement, Canada’s unemployment insurance covered 80 per cent of Canadians. Now, employment insurance covers fewer than 40 per cent.
For years, economists and social policy experts have warned that Canadian governments are poorly prepared for the next economic emergency. In 2005, Toronto-Dominion Bank chief economist Don Drummond stated that Canada’s social safety net no longer protects its most vulnerable working-age adults, a legacy, he said, of deep cuts to provincial welfare and an EI system that is out of sync with the labour market.
Over the last five years, about 280,000 jobs have disappeared in the forestry and auto sectors. The pace of job losses has accelerated dramatically in recent weeks and the worst is yet to come.
Dennis Barlett, a Hamilton job placement co-ordinator, told the Globe and Mail last week that the unemployed began coming through his doors in droves in September.
“I’ve never seen anything like this. It’s just devastating.” In the recession of the early 1990s, many could collect UI for three years. Bartlett says that won’t happen this time. Many will have to go on welfare immediately — welfare that deficit-averse governments have been slashing for years.
The next time we comfortable, employed Canadians — the only Canadians apparently worthy of the name for the crowd in power — encounter fellow Canadians sleeping on a grate or standing at a food bank, be sure to ask how happy they are that, to quote a Depression-era song, their government would still prefer to leave them to “Sing a song of sixpence. A planet full of fools. Everybody starving. By sound financial rules.”