The Conservatives will bring down their budget Tuesday, and we may as well join in the frenzy. Readers are invited to submit their proposals in the following categories (and are encouraged to add categories if the ones below don't fit):
- Good ideas that are likely to be part of the budget: Since the Liberals have made it clear on several occasions that this is a deal-breaker for them, I expect to see some gesture towards increasing transfer payments to low-income households.
- Good ideas that are unlikely to be part of the budget: My GST-as-stimulus proposal.
- Bad ideas that are likely to be part of the budget: Permanent income tax cuts.
- Bad ideas that are unlikely to be part of the budget: A commitment to take a serious chunk of change to Vegas and bet on the Leafs to win the Stanley Cup.
- Ideas that aren't bad per se, but are pretty much useless as fiscal stimulus measures: Corporate income tax cuts, infrastructure projects.
Worthwhile Canadian Initiative 
Hi Stephen,
had a busy week so not sure if you discussed it already elsewhere an I missed it or not. If so can point me int he right direction. If not could you say a few words on why permanent tax cuts is not a good idea in midst in recession from your perspective.
I thought we agreed that your idea on the GST was a bad idea, because even if the first part (lowering the GST) was implemented, the second part (raising it again) never would be? š
Why are infrastructure projects useless as stimulus? Because the people who’ve been overoptimistic every step of the way so far think this will all be over in a few months?
Yes, it’s the timing thing. Especially since we’d first have to wait for construction workers to be laid off from their current jobs.
seaandthemountains: permanent tax cuts (unlike temporary tax cuts) will be more likely spent on consumption, which is good for stimulating demand, but will cause a permanent deficit, which is bad. Plus, when the economy recovers, you will want to reverse those tax cuts, both to reduce demand again, and to eliminate the deficit. There really CAN’T be a truly permanent tax cut, unless you also have a reduction (sooner or later) in government spending. Otherwise the government goes bust.
On your fourth point, it is worth pointing out that the reason infrastructure spending is not stimulative is that the time frame of these projects usually falls outside the recessionary period, in fact they have a tendency to begin stimulating the economy once it has already recovered.
The initiative by the Quebec government two years ago to begin a massive infrastructure program should help in the current climate; but at the time the reason for the program had nothing to do with economic stimulus, but rather because the place was/is falling apart. The fact that it is producing an economic stimulus today is just a bonus…
On your fourth point, it is worth pointing out that the reason infrastructure spending is not stimulative is that the time frame of these projects usually falls outside the recessionary period, in fact they have a tendency to begin stimulating the economy once it has already recovered.
The initiative by the Quebec government two years ago to begin a massive infrastructure program should help in the current climate; but at the time the reason for the program had nothing to do with economic stimulus, but rather because the place was/is falling apart. The fact that it is producing an economic stimulus today is just a bonus…