Photo: screen capture from CTV News
The Conservatives delivered their quarterly economic report today, one of the “conditions” for passing the January budget, otherwise known as the day that Michael Ignatieff put Stephen Harper “on probation“. The Prime Minister said that Canada’s economy is in recovery mode partly because of the $62 billion “shot in the arm to the economy”. Mr.Harper said that 80% of the measures outlined in the stimulus plan are flowing, or are committed to flow shortly when specific projects are approved:
“Some signs of stabilization have been appearing in the world economy. The effects of the recession are beginning to ease.”
Trying to mitigate any political fire the Liberals might play with regarding Employment Insurance, the government said that more than 100,000 Canadians are participating in federal work-sharing programs, and that the government will spend an additional $5.5 billion on the Employment Insurance program. An estimated 3,000 infrastructure projects are getting started under the $22.7 billion stimulus plan, but was vague on the details. The Prime Minister then issued a warning against any political instability during this time of economic recovery.
What doesn’t quite make sense about this economic update, however, is the assertion that both the economy is recovering, and that it is the stimulus that has enabled it to do so. Addressing the former assertion, the Prime Minister certainly has a strong argument that it is. The TSX is up as good news rolls in from south of the border, the dollar is rising, and the composite index today is up to 10,665, the highest point in the daily reports shown in months. As well, a recent international Ipsos poll showed that global consumer confidence had stabilized in Canada, after three straight semesters of plunging. The survey showed “positive” indicators in consumer confidence based on discretionary household expenditures.
But has the “stimulus” had anything to do with economic recovery? While the government makes a bold statement that it has, less than a month ago the Financial Post ran a story that showed only 5% of the stimulus money had even been released into the economy yet. Even with the most up-to-date statistics, there is no chance that recent stimulus spending could have any effect on economic indicators talked about in the Prime Minister’s speech. So the economy seems to have stabilized, and even turned around, all without the massive spending that has been so urged by the members of the opposition government. Under Canada’s Parliamentary rules, supplementary estimates haven’t even been voted on in the stimulus budget yet, and those projects that have been green-lighted are very dubiously linked to any growth recovery.
So if economic indicators are positive, consumer confidence is growing, and unemployment is leveling off, why do we still need to spend billions of stimulus bucks? The answer is found at the tail end of a National Post editorial. Politicians of all stripes want credit for fixing the economy, and win praise from voters with local infrastructure programs that have nothing to do with economic recovery. It may be that the Keynesian economics being played in Ottawa is more for show, than for effect.
June 11, 2009 at 11:09 am
Raph, I just left this post for you at Joanne’s. Didn’t realize you had this post up, so I’ll copy and paste here.
Raph, I know that the belief the opposition and media version have is that little stimulus has been added to the economy, and therefore the recent bright signs are not related to the stimulus. That is false.
The first $3 billion is almost completely out the door. The 80% the PM mentined today has allowed the provinces and municipalities to sign contracts for infrastructure. Companies signing those contracts have been investing in new equipment and vehicles, That is a major reason truck sales are seeing an improvement.
As well the federal government is not fully funding most stimulus projects, but rather sharing the cost with the other levels of government. Some of these projects are already underway, with the municipalities and provinces having already put forth their own funds knowing the federal portion will be there when needed.
The remaining 20% of that stimulus funding won’t actually go out the door so to speak. That remaining 20% consists of the tax cuts and credits introduced in the budget. Those tax cuts are permanent by the way, with the PM managing to get some Conservatie policy into a budget the coalition demanded. Those tax cuts and credits are alreay in place and reaping benefits for the economy.
In addition, the Home Reno tax Credit has been a huge success in stimulus, although technically that is money that doesn’t go out the door, but will be gi\ven as a tax credit for the years 2009 and 2010. The CEO’s of Rona, Home Depot, and Lowes as say they have seen 10’s of millions in revenue from that tax credit.
As for the most recent job loss numbers, the 60,000 is a bit of an anomoly. Due to the Chrysler bankruptcy, Chrysler employees, as well as those in parts plants and other businesses related to Chrysler, were laid off indefinately as there was no known due date. Because of this, they were added to the job loss numbers. They will be returning to work in the next few weeks, which will bolster June’s numbers.
June 11, 2009 at 1:54 pm
The home reno? Try and get an estimate now, they charge because they are so busy. It is definately working and particularly for me, windows and environmental cost saving things, the biggest wait.
OHHH but I live in Calgary and I thought we were all egghead redneck, anti environmentalists? Been doing it for years and God forbid, I’m Conservative.
June 11, 2009 at 2:04 pm
It may be that the Keynesian economics being played in Ottawa is more for show, than for effect.
I think this has pretty much to be shown as the definition of what Keynesian economics mean.
June 11, 2009 at 4:10 pm
“The TSX is up as good news rolls in from south of the border, the dollar is rising, and the composite index today is up to 10,665″.
The news from south of the border is really not that good – they are printing money at a rate to rival the Weimar Republic, interes rates are rising because that is the only way the US can sell its long-term bonds (4.7% today), they have a huge deficit, and the interest payments on the debt are astronomical.
The TSX has gone up like a meteor because Canada is seen as a more stable place to invest, and the dollar is going up partly because of the rise in oil prices and partly because the US dollar is so weak.
The Dow fell more steeply than the TSX and lost over 50% of its 2007 value, recovering today to be only about 35% down. The TSX lost 40% of its 2007 value, and right now is still down about 20%. Part of the reason for the confidence in the Canadian market is the approach this government has taken to spending the stimulus money, insisting that it should focus on job-creation as opposed to some of the pork-barrel projects in the US. So although the dollars have not necessarily been spent, the commitments have been made and the market, which is always a forward indicator, has rebounded on the confidence that these projects will deliver.
So would confidence have come back even if the government had done nothing ? Possibly, but it would have been slower. Not to mention the pressure of daily headlines about thousands unemployed, bankruptcies skyrocketing and the opposition parties having a field day.
June 11, 2009 at 5:43 pm
So would confidence have come back even if the government had done nothing ? Possibly, but it would have been slower. Not to mention the pressure of daily headlines about thousands unemployed, bankruptcies skyrocketing and the opposition parties having a field day.
It makes you wonder who is actually running Canada, the elected government or the unelected unaccountable media.
June 12, 2009 at 7:51 am
Joe, Why would you have to think about that question ????