Thursday, December 23, 2010

Krugman speaks, Flaherty spins

Posting this video for a bit of fun but also for the concerns raised. Maddow is at the 92nd Street YMCA in New York for a few live shows this week, so it's been nice to see her with the live audience and their reaction. It's also a short but decent discussion with one of the preeminent economists of our time, that would be, of course, Paul Krugman. He believes there's not nearly enough stimulus that's been done in the U.S., as we know if we read his columns, but he makes the point here again. A few choice quotes from Krugman are rude awakenings: "We really have seen all sanity driven from one of our two political parties;" and while he remarks that it's been a few good weeks for Obama, "think about the next few years and it's extremely frightening."

Krugman is talking not only about political worry but economic worry. That is a backdrop that is possibly affecting Flaherty's budget preparations now, but we shall see:
“The economic recovery is moderating and the outlook remains uncertain,” the Washington-based International Monetary Fund said of Canada in an assessment released Thursday. “Looking ahead, risks are elevated and tilted to the downside with high household debt levels the main domestic risk, and a weaker U.S. outlook the largest external risk,” the IMF concluded.
“What I’m hearing really sounds a lot to me like cautious restraint,” he said in an interview in his Parliament Hill office. “Nothing Draconian is being asked for. People do want us to move toward a balanced budget, but they do not want us to do that at the expense of jobs and growth and the economy.”

He is now describing the upcoming budget in February or March as a “pragmatic” set of policies that will balance the need for economic stimulus with the need to begin emphasizing government restraint in Ottawa.
There are other year-enders with Flaherty out there too with slightly different emphasis in each of them, yet it all seems to point in one direction, a careful Flaherty with an eye on how pivotal this budget will be as an election catalyst. Likely for that reason, he's playing down the notion that there will be big cuts. That gets big play in the Globe. See other interviews covered in Bloomberg, QMI and the Canadian Press where, notably, Flaherty indicates that they have looked into doing something on home care, but he's really not clear there on whether they might do anything, citing cost. You also see, in the interviews, talk of retraining programs for workers, infrastructure spending continuing, see the Bloomberg report, for example.

Flaherty says he's also concerned with interest rates and mortgages and Canadians getting into too much debt with "too much house," (QMI). That's ironic considering what's going on under his own roof, Jim's unable to meet his own departmental budget.

Making your way through all of it, it sounds like Flaherty's trying to be as uncontroversial as possible, likely what is intended. Based on what they've done thus far, we could see targeted cuts on the one hand (see this news today for example) combined with more of that skewed spending toward Conservative ridings and electoral prospects on the other hand. You could call it slash and splash. The "cautious restraint" of the uncontroversial budget...we'll believe it when we see it from Flaherty.