Tuesday, June 02, 2009

Strange Timing

For the past three years, critics have lamented the government's inability to reign in spending. Leave it to the Harper government to suddenly turn off the taps just as the country and economy actually need it:
Government spending growth in Canada actually slowed to below the historical average in the first three months of 2009, even as the recession's grip tightened...

Government spending rose only 0.3 per cent in that period over the previous quarter. This increase even fell short of the 30-year historical average of 0.5 per cent for quarterly government spending growth.

"In a quarter they're supposedly rolling out big stimulus, government spending actually rose less than a typical quarter," BMO Nesbitt Burns deputy chief economist Doug Porter noted.

As Mr. Porter observed, it's a surprise that government spending growth actually softened as the downturn grew.

"We were actually expecting a bit more of a positive impact from government spending."

I've heard a rumor that as we get more mandated disclosure on spending, ending this past fiscal year, we could see a suspicious effort to hold back spending, so that it didn't count against the deficit. The above tends to lend some credence to that belief. It will be interesting to see if the government put the optics of their bottomline presentation above spending that was already allocated, clearly needed.

11 comments:

penlan said...

"It will be interesting to see if the government put the optics of their bottomline presentation above spending that was already allocated, clearly needed."

Steve,
Would you mind re-wording that sentence? I don't understand it.

Steve V said...

There is some question whether the government purposely held back spending, particularly last year's infrastructure allocation, so they could claim the books were balanced for the last fiscal year. Is that clear? This revelation tends to support that contention.

Joseph said...

I'm actually pretty convinced that spending allocation has been held back. Just lots of anecdotal examples of spending "announcements" in which spending never really seems to flow afterwards.

I think they have always been hoping the economy would right itself, and they'd be able to claim to be "good stewards" of public funds. Or, in another nebulous act, they just want to wait until an election is called and then start rolling the money out, with lots of appearances that coincide with "real concrete action" on their previous promises. No matter how much earlier the announcement was, it would all be explained away as necessary steps.

I wouldn't put them past delaying even things like tax refunds so they could get the numbers in the next quarter rather than have to take revenue off the books from under-estimating how much their highly touted credits actually hit the bottom line.

There just seems to be a consistent disconnect between announcements, money flowing, and the ever-changing (actually ever-growing) deficit numbers.

Why would I suddenly expect openness and honesty on critical matters from a government that feels the need to lead the public astray on the littlest things?

John said...

Liberals should be careful in how they respond, lest the Conservative response be:
"Yesterday the opposition was saying the deficit was too large, now they are upset it isn't going to be larger"

Liberals should bear in mind that the economy likely will recover without this money and the lower the deficit ends up being, the easier it will be for Liberals to actually do SOMETHING MEANINGFUL when they form the government after the next election instead of having to focus an entire term on just slaying the deficit.

Having to do a repeat of the massive cuts of 1995 is not something Liberals should relish and in a minority government context could actually hurt the re-election chances for the election after.

penlan said...

Thanks Steve. I understand now. Good points!

Patrick said...

Is there the possibility that you can somehow trick the economy out of a recession? Tell everyone you're spending tons and tons but never actually spend it.

As much as this is a very deceiving way of going about business in government, I have to say that, if it works... even if we aren't taken out of the recession because of the government's fake progostics, it could end up being a huge boost for the conservatives. A year or so from now, looking back, the optics might end up being that they knew exactly what they were doing all along.

Steve V said...

Joseph

Someone should do a cost analysis, of what it's cost taxpayers for government officials to run all over the country reannouncing OLD money.

Patrick

I've always wondered if government will hold back some of the stimulus, should the economy start to rebound. The Conservatives heart has never been into this kind of initiative, so I could see them hedging, based on optimistic scenarios.

John said...

Steve do you still think Liberal electoral interests are best served by waiting till next year's budget for an election (when the NDP and Bloc would have a harder time continuing to prop up the government), or do you think NOW is the best time to go (and we should be ensuring the NDP and Bloc support a non-confidence motion on June 23rd)?

Liberals might find it hard to admit, but it's possible now that the economy, the deficit and Conservative fortunes have now hit rock bottom and that waiting for a better line-up of candidates and more money in the bank just might not be worth it when we have them right where we want them now.

The fall won't happpen (the updates we had placed in the last budget are only for March, June and Dec and NO ONE will want a Christmas election during a recession or an election over a throne speech seems kind of odd), so it's now or next year after the Olympics.

Steve V said...

John

I don't think the Liberals are confined to these fiscal updates. Pretend they don't exist, does that mean a government can't be defeated?

I think the fall is the key time, although we could well make it to the next budget. A few months ago, I toyed with going now, but the optics just aren't there, so I'd wait or risk serious backlash.

John said...

Well I think the only opportunity in the fall will be a throne speech and they'll make sure to buy off the Bloc OR NDP to keep them going till the next budget.

So I think it really is a choice between now of Budget 2010 (which is scheduled for March right after the Olympics, which Cons admit is THEIR preferred time to go).

I agree on possible backlash over a summer election, but that kind of anger lasts two days, people predicted a backlash against Harper for breaking his fixed election date law, in the end there was ZERO evidence of that.

It's not like an election would be over nothing, there would be many principled reasons to go, we could make our case and we would stack up very well against the rest of hte competition. And Parliament isn't sitting so it's hardly like we would be preventing any laws from being passed.

Wait till March who knows Harper may already be gone and we lose our best asset. I don't know about you but I'd rather run against Harper than Prentice. That not to mention the fact that everyone knows the economy will be in much better shape by next March and it's guaranteed that the deficit will be smaller than $50 billion by that point.

There are risks in going now, but I think the risks are greater to wait. We delude ourselves that we'll get an election in the fall.

Steve V said...

"I agree on possible backlash over a summer election, but that kind of anger lasts two days"

That's something I've played with, because it's important to project after the initial shock of another election. I remember the same numbers last year, nobody wanted an election. It's like asking if you want another cavity. Once a campaign starts, the issues take over, and then events drive campaigns, it's a distant memory.

Then I think two elections within a year, maybe that's a different animal, especially all the logistics of a summer election.

I'd play the angle, wherein you counter the obvious cries of opportunism with a simple recall of recent events. If I wanted to be PM, I could have months ago, but no, we chose to try and make parliament work, we thought in the national interest. However, given the complete incompetence, the laundry list articulated, we can't in good faith express confidence in these guys to get us out of a serious predicament. The question then becomes, has Ignatieff established himself enough to pull it off. People don't see him as particularly partisan, he did himself some favors with the budget dance, so he might look credible.

Who knows...