So Far So Good:New Liberal Canadian Government Stands Behind Its Stimulus Infrastructure Plan

It was good to see Minister of Immigration John McCallum who is an economist and the Minister of Finance Bill Morneau defend the Keynesian Liberal plan to use much needed new  investment infrastructure to promote economic growth, employment and innovation in the Canadian economy as a counter cyclical force to the slower economic growth that is emerging and that is predicted to accelerate by the parliamentary budget office and the IMF. As McCallum explained the slower growth is precisely why one needs to invest and it provides even greater justification for deficit financed investment in infrastructure. Mr. Morneau concurred in this judgement. The amount currently spoken of some 10 billion dollars in the first year is modest in relation to the GDP of 1.98 trillion Canadian dollars. The current anticipated deficit is 0.2 % of the GDP. It will initially rise by a small amount but as the employment created by these investment circulates throughout the economy affecting other proposed investments and states of confidence the impact will be multiplied modestly and the increase in the deficit even in the medium run will be lessened.In any case the parliamentary budget office is projecting a falling debt to GDP ratio which at the present is still historically quite low.It projects the debt to GDP ration falling from 31% to 26.1%. The strategy combined with the tax cut for the middle class should help diminish currently unspent quasi hoarded cash balances in the private and corporate sector and restore optimism  in expectations of private consumers and business investors.If the economy slows a great deal further and faster one might want to spend more of the allocated amount faster by front loading it  and consider expanding the program.

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About haroldchorneyeconomist

I am Professor of political economy at Concordia university in Montréal, Québec, Canada. I received my B.A.Hons (econ.&poli sci) from the University of Manitoba. I also completed my M.A. degree in economics there. Went on to spend two years at the London School of Economics as a Ph.D. student in economics and then completed my Ph.D. in political economy at the University of Toronto. Was named a John W.Dafoe fellow, a CMHC fellow and a Canada Council fellow. I also was named a Woodrow Wilson fellow in 1968 after completing my first class honours undergraduate degree. Worked as an economist in the area of education, labour economics and as the senior economist with the Manitoba Housing and Renewal Corporation for the Government of Manitoba from 1972 to 1978. I also have worked as an economic consultant for MDT socio-economic consultants and have been consulted on urban planning, health policy, linguistic duality and public sector finance questions by the governments of Manitoba, Saskatchewan,the cities of Regina and Saskatoon, Ontario and the Federal government of Canada. I have also been consulted by senior leaders of the British Labour party, MPs from the Progressive Conservative party, the Liberal party and the New Democrats on economic policy questions. Members of the Government of France under the Presidency of Francois Mitterand discussed my work on public sector deficits. I have also run for elected office at the municipal level. I first began to write about quantitative easing as a useful policy option during the early 1980s.
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