Federal government budget in Canada reinforces the eclipse of deficit dogma and anti Keynesian thinking on appropriate policy

The Canadian minister of Finance Chrystia Freeland has tabled a moderately but seriously Keynesian and progressive budget that takes seriously the negative impact of the Pandemic and the necessity of lowering the unemployment rate from 8 % to 6 %.and beyond. The government will inject a massive amount of deficit funding to finance the extension of a range of income support programs, programs to assist small businesses, child care spending plus a fifteen dollar an hour minimum wage.

The government‘s deficit will rise to 16.1 % of the GDP but unemployment is still projected at an unacceptable level while inflation is expected to rise slightly due to oil price increases which may materialize as the global economy recovers. But on this front the pandemic has taught us that many workers can do part of their jobs from home .This fact lowers per capita fuel consumption thereby depressing fuel prices and also facilitates reducing emissions.Despite the chorus of anti Keynesian deficit hawks their argument will fall by the wayside both in political terms -the measures taken on child care, the minimum wage and the extension of anti covid income support programs will be very popular and in policy terms there are very justifiable reasons to run such a large deficit-the net federal debt to GDP ratio will remain relatively low at close to 50 %.

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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