The Case for Restraint

December 1st, 2010
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My “Open Range” column from the December 2010 issue of Alberta Venture magazine

Three cheers to Stephen Harper for steering Canada away from a U.S.-style spending calamity

American voters showed their disenchantment with President Barack Obama and the Democratic Party in last month’s Congressional mid-term elections, and a bigsource of their fury was the colossal mishandling of the US$787-billion federal stimulus program. The American Recovery and Reinvestment Act was supposed to get more than a million unemployed Americans working again by focusing on thousands of “shovel-ready” public infrastructure projects. It did nothing of the sort, and Obama was reduced to bragging about the jobs created in making the signage (at US$10,000 each, totalling US$192 million) used to advertise the local stimulus spends.

Here in Canada you can’t have missed seeing those “Action Plan” signs with the sweeping green-and-blue stripes suggesting a bold push into a better tomorrow. These propagandistic flourishes probably also cost more than they should have. But what really distinguishes Canada’s federal stimulus program is how much better it’s been than its disastrous U.S. counterpart, not only in relative size but in conception, political intent, administrative structure and, most of all, execution. For that, we have our oft-maligned prime minister, Stephen Harper, to thank. I think Harper saved Canadian taxpayers billions of dollars.

That happy result came about because the PM and a few key ministers thought things through. They knew the huge new pile of cash in the 2009 budget was potentially toxic. The opposition and news media would be watching their every step. If money was misspent, the Conservative minority government would be toppled and probably lose the subsequent election. Instead, some adroit moves brought about the opposite result – a whole bunch of newly paved roads and fixed-up seaports and other public facilities. It also keeps Harper on track to becoming the longest-serving minority prime minister in Canadian history.

First, the stimulus program was kept temporary. Unlike nearly all other government programs, it would actually end one day. Second, there’d be no special department created to administer it. That would have led to empire-building and inexorable pressure to make “stimulus” a permanent program. It would also encourage delay and waste – hundreds of millions for “project definition.”

Third, despite immense opposition pressure to emulate Obama, the Economic Action Plan was limited in size. Depending on exactly what you count, and leaving out provincial spending, it amounts to $30-40 billion over two years. Fourth, there was maximum focus on real projects – building genuine infrastructure rather than simply inflating public-sector salaries. In the end, 23,000 projects were funded and virtually all the money voted was spent.

Harper, an economist with a pro-free market philosophy informed by luminaries like Hayek and Von Mises, knew government-funded projects would be less efficient than those run by the private sector. The trick was to minimize the inefficiency, and that became the plan’s fifth feature. Senior bureaucrats were called together and told this was their chance to shine. Rather than squabbling over spoils or spending the next two years obsessing over downsides – delivering inaction – they were persuaded to seize a golden moment to prove government can work. Reportedly, most responded with enthusiasm and even patriotism.

The Labour government in Australia, by contrast, created just the overarching new bureaucracy that Harper avoided. It spent the following 18 months hoarding cash and talking about what it might do one day, accumulating meetings, studies, presentations. It created jobs only for itself. This boondoggle helped drive the fall of Prime Minister Kevin Rudd.

The U.S. economy has shed seven million private-sector jobs since the recession took hold. But public-sector employment has increased – thanks largely to the stimulus program. In October, Obama admitted he had no idea when he claimed there were thousands of shovel-ready programs whether there actually were any. “Shovel-ready” became a sad metaphor for bureaucrats shovelling truckloads of cash to politically favoured groups. Meanwhile, actual U.S. infrastructure has continued to crumble.In one instance I saw personally, an excellent stretch of high-grade state highway in rural Montana was ripped apart and rebuilt to the same standard, with no improvement. The rebuilt section lies on an Indian reservation. One U.S. columnist called the stimulus “a Trojan horse for pet projects promoted by special interest groups,” an effort to “expand government” with “little apparent connection with economic growth.” Any new spending – higher welfare payments, global warming research – became “stimulus.”

In Canada, through good management, the Conservatives dodged a multibillion-dollar political bullet. For this great service to Canadians, they’ve been maligned and ridiculed by the opposition. The Liberals hammer the government for running up the deficit – after nearly toppling the Conservatives for crafting too small a stimulus. You do remember the Liberal-NDP-Bloc Québécois coalition back in late 2008? If they’d had their way, the deficit would be $90 billion. A Liberal-run stimulus would have been conceived, structured and directed with partisan political intent, and with results little different from those under Obama. Canada has vastly outperformed both the U.S. and its own past record. Much of the credit belongs with Stephen Harper.

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By George Koch