Foolish Fiscal Conservatism & Liberal Leadership

November 21, 2008

Stocks on the New York exchange moved up close to 500 points a technical rally driven by some positive rumours about Obama's new cabinet. This may well evaporate on Monday in response to   news as the markets remain very volatile.

The Liberal leadership campaign however remains depressingly flat and   predictable with none of the three candidates displaying much originality nor economic competence with respect to appearing to know much about what to do about the impending slowdown in Canada.

Our dollar has fallen to under 80 cents
not necessarily a bad thing but it reflects the pressures that the Canadian economy will face in the coming months. Oil prices have fallen which will affect investment in Alberta, prices are dropping generally which indicates disinflation and may presage deflation, manufacturing jobs continue to be lost and the threat of the collapse of the big three auto producers would have disasterous consequences for the manufacturing sector in both Canada and the US. So given these facts what do our three leadership candidates focus on ?
They insist on criticizing the Conservatives for having reduced the surplus through a sales tax cut   and made the government more likely to run a deficit as the economy turns down.   In fact, although it is a debatable point about whether income tax cuts or the sales tax cut would have been more desirable it is a good thing that the Conservatives cut taxes in advance of this recession and it will be a good thing if the Conservatives plan their budget to include a large deficit financed stimulus package that focuses on infrastructure, improving accessibility to employment insurance benefits and programs addressed to reducing homelessness, poverty and improving education, training and   sustaining employment.

The Liberal leadership candidates are stuck in the past not yet having understood that the world has changed dramatically with the collapse on Wall street and in the global financial markets. The TD bank's recent revelation of losses in certain investments demonstrates that Canada is not immune. There are clear and present dangers ahead in the economy. Leadership demands boldness as well as imagination and courage as opposed to simply cautious repositioning to the mainstream of conventional wisdom.
The times are far too risky and the Canadian public will respond if its explained to them the way in which public spending is financed and how deficit expenditures can benefit the economy in a downturn.It is not about academic theory its about historically demonstrated sound public policy that brought relief to millions of North Americans in previous recessions and the Great Depression.

The American Democrats and some Republicans have understood that bold decisions are needed.
The hour of liberalism has returned.

The bell is tolling.

Its time that Liberals woke up from their fiscally conservative trance.

The bell tolls for thee.