Fine, but John Maynard Keynes, the
guru of many macroeconomic analysts really set things out pretty simply:
1. The economy goes in cycles: ups and down;
2. The "downs" produce considerable social hardship which governments
can (and should, in his opinion) help to alleviate ~ not prevent or "cure," just alleviate, somewhat;
3. The "ups" produce excess revenues, all other things ~ like taxes ~ being equal; and
4. All debts must be repaid when due.
Keynesian economics suggests, therefore, that when the economy is on a downward trajectory (depression or recession) governments should spend to create jobs (put money in consumers' pockets) and stimulate "demand," which will, in the normal course of events stimulate "supply" which will create even more jobs and so on.
BUT, and this is the part with which too many politicians and almost all laymen never bother, when the economy swings back "up" again governments need to switch off their stimulus spending and use their revenue to lower debt back to acceptable levels. (There's a HUGE range of "acceptable" amongst economists: many (most?) says 20% to about 35% is OK, some say 50% is still fine, a few (very few?) allow that even 75% is OK when coming out of a recession.)
That second part of
Keynesian economics is the problem.
First: social spending (transfers to individuals) is very, very hard (nearly impossible, politically) to "turn off," so, therefore,
social spending ought
never to be a part of stimulus spending. This is a message that,
it appears to me, is lost to 99% of NDP
ers, 85% of Liberals and 50% of Conservatives. But it is a critical message: you can only spend, on soocial programnme, that which you can afford almost forever, in good times and bad.
Second: the programmes which can, sensibly, qualify for stimulus will, of necessity, leave out the poorest of the poor and those most in need. The programmes which do qualify, in general, are "public works" (buildings, roads, bridges, airports, etc,
public blunders and wonders is what we used to call the work of the old (1950s and 60s) Department of Public Works) and the acceptable projects ~ those that can be switched "on" and then "off," again, are generally construction and maintenance. Not even all "public works" are really acceptable, to many economists, if, as Canadians tend to do, we stretch the definition to include e.g. hockey arenas. Thus, there are limits to what a sensible
stimulus programme ought to include and the tighter those limits the fewer people the government "helps."
But ~ there are always "buts," aren't there? :nod: ~ Canadians have come to
expect, a holdover from the 1970s,
I think, that they are
entitled to and that governments can provide something akin to a cradle to grave guaranteed annual income. Canadians expectations, more than economic theory, drive politics.
So, in the sustained "up" period (about 1994 to 2007) many economists ~ not all, to be sure ~ believe that Prime Minister Chrétien ought to have, aggressively, paid down debt and, essentially, capped social spending. In fact he did the opposite ~ as most politicians of all parties usually do. Those same economists believe that, in 2008-2011, Prime Minister Harper spent too much on
stimulus and adopted, in fairness to him, under pressure from the LPC and NDP, too broad a definition of "acceptable" projects. Now, there are some perfectly good economists
Jim Stanford, of Unifor, for example, who would disagree vehemently with what I said above ... there's an old joke about leaving two economists in a room and getting three opinions when they come out:
