Tuesday, January 27, 2009

Budget Impressions

After days of leaks, we finally get to see the whole thing. The Government claims that stimulus spending of 1.5% and 1.1% of GDP in 2009 and 2010 respectively will lead to 1.9% and 1.4% in increased GDP for a total of 3.2% over two years (watch this space for 2009 and 2010 forecast updates) Based on a quick reading of the budget, here is how I would break it down:

Good Policy:

Infrastructure spending: I can see Stephen Gordon's point - but I still think that infrastructure spending will provide some stimulus - and at least maintain demand for, if not create, construction jobs.

Access to Credit: $5 billion to the BDC, EDC to keep credit flowing to viable small businesss seems like money well spent. The additional $50 billion for the Insured Mortgage Purchase Program to purchase mortgage backed securities from banks is also a good idea.

Tax Cuts: meh - I'm sure I could find a lot of "middle-class" people that make over $80K. Hopefully the individuals targeted will spend the extra $200-500 instead of funneling it into TFSAs.

Retraining - not really stimulus, but I think necessary if Ontario is going to finally wise-up about the prospects of its Manufacturing industry.

Political Pandering Masquerading as Stimulus Policy:

Social Housing: This is not politically correct, but to me spending on social housing or housing on reserve land is simply pouring money into what Hernando de Soto termed "dead capital".

Bad Policy:

$7.5 billion for forestry, autos and manufacturing - rewarding failure and years of underinvestment. Not good use of taxpayer money.

2 comments:

Joshua Prowse said...

In regards to social housing, I take your point. My question is what would a more ideal or more free market response to homelessness look like?

Shock Minus Control said...

Unfortunately Joshua, I'm not sure I have any sort of answer to that.

I see some of the value in social housing - provides a fixed address necessary to find employment, etc. Although, the homeless in Vancouver strike me as largely falling into two groups - 1)Individuals with mental illness who should be in a hospital (perhaps in one a bed that the Campbell Liberals got rid of) and 2) near lost causes - tweakers, crackheads, etc.

The solution to the first is hospitalization, medication, and care- the solution to the second? no idea.

Your thoughts?