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Before people go into paroxysms of deficit-angst today, keep in mind a fundamental truth of economic accounting: one sector's deficit is another's surplus. By pumping billions into income supports & business subsidies, fed govt literally made us richer #FiscalUpdate #cdnpoli ..2
Household saving grew dramatically during the pandemic: partly because shopping was hard, but mostly because fed income supports & wage subsidies protected incomes. Business saving also grew (less dramatically). Graph shows change in quarterly net savings from 4Q19 to 2Q20. ...3
Without that huge injection (and corresponding deficit), households would have experienced much bigger losses, with resulting macro-economic destruction: collapsed spending, evictions, worse job loss. Best of all: negative real interest rates mean it cost govt nothing.
Another clue there's no 'debt crisis' in the offing: fed int. payments have never been lower as a share of GDP (1/6 of what they were in 1990, our last phony 'crisis'). Interest charges will actually *fall* this year despite the huge deficit. Doesn't look like crisis to me ...5
Conservatives hate the #BuildBackBetter proposals: nat'l child care, pharmacare, green transition. So they invoke debt & deficit fears to claim we can't afford it. Nonsense. And they repeat the old lie that Canada had a debt crisis in the 1990s to stoke angst. Also nonsense...6
Here's my review (for @ccpa's Alternative Federal Budget project) of the phony politics of "crisis" used to justify huge but unnecessary cutbacks (mostly to EI and provincial health/social transfers) in the 95 budget: https://www.policyalternatives.ca/publications/reports/paul-martin-deficit-and-debt. Those cuts are still hurting us today
