07/20/2014 10:54 EDT | Updated 09/19/2014 05:59 EDT

Canada Needs to Reject Radical Right Thinking

This kind of talk about out-of-control government spending in central Canada will build and build. The right has a huge megaphone in this country and the ideas are rarely challenged in the mainstream media.


First we were invaded by U.S.-style hard ball election tactics, largely thanks to the Harper government. Do we now have to put up with nutbar economic baloney from the radical U.S. right as as well?

Unfortunately, yes. These theories assert that government spending is the root of all evil. They maintain that if we slash, slash and then throw in a tax cut, businesses leaders will soon prance around like those aging actors in a Viagra commercial. It's wrong and purposefully misleading. I will explain why.

But first off let's examine where we are at. Right now Quebec and Ontario are the favourite whipping boys of the far right. Apparently big spending governments are "crowding out" business investment. And everyone is piling on.

Bond rating agencies, you know the ones that helped bring on the Great Recession of 2008 by misleading investors on real estate, are now wringing their hands over Ontario's debt. Moody's recently downgraded the province's outlook to negative from stable and they won't be pleased by Ontario's new budget.

Joe Oliver, Canada's indelicate finance minister, lent a helping hand to the rating agencies earlier this year by badmouthing Ontario and Quebec, saying the province's fiscal pictures will be a drag on the economy. Thanks for your help, Joe.

The C.D. Howe institute also chimed in recently with a report that suggested, but did not prove, that spending in Ontario and Quebec was somehow spooking investors.

Here is Philip Cross, author of the report, in a follow up commentary in the Globe and Mail: "More public-sector spending may even hinder business investment, by crowding out the supply of capital or by signalling the expansion of government in many areas of the economy."

It sounds so scary until you look at the reality on the ground. Interest rates are not being driven higher by government borrowing. Lending rates in Canada are at historic lows.

But this kind of talk about out-of-control government spending in central Canada will build and build. The right has a huge megaphone in this country and the ideas are rarely challenged in the mainstream media.

The radical right is obsessed with austerity, the same mindset that took root in Europe after 2008. They believe cutting spending would spark the appearance of the "confidence fairy" for investors -- as the economist Paul Krugman likes to deride it.

But we know that EU countries, including Britain, mostly added to their debt by slashing their budgets, and extended the economic slump. That's right: drastically cutting government spending usually means debt goes up and growth falters. Because when you cut government workers and other services it takes money out of the economy and it never comes back.

Another example closer to home is Kansas, which recently embraced the tired rightest theories. It slashed spending and cut taxes. Guess what? The deficit soared and Moody's cut the state's debt ratings.

"The cuts, which largely benefited the wealthy, cost the state 8 percent of the revenue it needs for schools and other government services," the New York Times noted in an editorial.

Often these ideas come out of U.S. thinktanks that are funded secretly by Big Oil and other selfish groups. These ideas are not necessarily nonsense, because they do work -- for the select few. Basically it's a strategy to lift all yachts, while the rest of us in dinghies are overwhelmed.

Ontario voters were right to soundly reject the austerity plan of Tom Hudak's Conservatives and his inane plan to cut 100,000 government jobs -- an idea he got directly from the U.S. radical right.

In reality, the debt and deficit spending in Ontario is the result of a weak economy. Ontario is actually the leanest province on a per capita basis. The province has a revenue problem, not a spending problem.

Ontario is getting less revenues because its manufacturing base is under siege, and you can blame the country's high flying petro currency, largely created by the Harper Government.

So Harper, Oliver and the gang have helped bring on the troubles for central Canada and now they have the nerve to blame it on provincial spending. To be fair, the Harper government did embrace stimulus spending after the big recession set in, but since then it has been cutting spending back, so it can show a dubious surplus before heading to the polls next year.

Does it mean Ontario and Quebec can keep on spending? No, paying the interest on the debt is a burden on taxpayers. But the provinces needs growth and a little inflation, as well as targeted, higher taxes, to gets their houses in order.

What Canada needs is more home grown entrepreneurs willing to invest in growing sectors such as renewable energy. If they know the government is not going to embark on destructive spending cuts, they can count on home grown demand.

So, let's reject the ideas of the radical right and then we will really see an appearance of the confidence fairy.


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