Friday, August 19, 2011

Today in Finance Committee

So the big political news out of the Finance Committee meeting today where Jim Flaherty and Mark Carney provided updates on the state of economic affairs for Canada amidst this sea of difficulties seems to have been this:
On stimulus

“That’s exactly what we should not do,” Mr. Flaherty said as he rejected NDP calls for new spending on infrastructure and aboriginal communities to stimulate the economy now. Yet when pressed by Liberal MP Scott Brison on whether he would bring in new stimulus if the economy worsened, the minister said this: “If we were to see the situation globally deteriorate in a dramatic way, we would obviously do what is needed to protect our jobs and economy and families in Canada. We would act in a pragmatic way, as we have done successfully, previously and recently.”
Substantively, I don't know whether to be optimistic about that statement or pessimistic. Stimulus to Conservatives has been an opportunity to message, self-promote and solidify themselves electorally. There's not a lot of trust there. On the other hand, at least he's acknowledging a pragmatism that would be required. But he's risking sticking to a course that was set months ago and may be harder to pivot from the further down the road we go if world conditions continue to worsen.

More on what sticking to the deficit reduction course in a low growth environment means:
On the deficit

“We will stay the course. We will balance the budget by 2014-15,” Mr. Flaherty said. “That's the plan and we intend to stick to the plan.”

What it means: The Harper government is not using slower growth as an excuse to push back its deficit elimination plans. But slower growth will ultimately mean less revenue for Ottawa. That will create pressure on Ottawa to cut spending more deeply to make up the difference.
Which has already started.

A minor political observation here...Brison's time was limited compared to the allocations to the Conservatives and NDP. That he was the one who seems to have driven Flaherty to the above admission seems notable.

More:

Flaherty's opening statement
Carney's opening statement (pdf)
Flaherty, Carney brace for lower economic growth