Tuesday, January 27, 2009

'Stimulus' is not the cure for what's ailing the economy - Vancouver Sun

When Finance Minister Jim Flaherty conducted his cross-country consultation trip in search of recommendations for Tuesday's federal budget, most interest groups, economists and activists called for massive increases in government spending to "stimulate" the economy -- much of it directed at their own pet projects or industrial sectors.

The unfortunate economic reality however is that "stimulus" spending simply does not work. If the federal government is truly interested in doing what is best for the economy (and Canadians), the solution is reduced government spending and permanent tax cuts. For starters, a fiscal stimulus package will require increased government borrowing, meaning that the government will take money from some Canadians (who will have less to spend) to give to others. The end result is more redistribution rather than more economic activity.

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