Tuesday, April 12, 2011

Setting the Record Straight:: Government Spending Under Trudeau, Chretien, & Martin

Canada's Debt Interest to GDP ratio, 1870-2010, from Globalfinancialdata
I'm hoping Stephen Harper's fear tactics start to fall on deaf ears regarding the economy. I found it laughable that he went after Trudeau over the weekend::
"The comparison I’m obviously making is the fact that as we all know in 1972 ... we had a Liberal government that relied on the NDP for ongoing support. All they did was spend money [and] that led to two decades of ... runaway spending, higher taxes, double-digit unemployment and double digit interest rates."
Really? I also like how he casually threw Brian Mulroney under the bus with his "led to two decades" crack. Ah, but the feeling is mutual, with Brian throwing stones at Harper's regime and alluding to disgruntled Conservatives in the moderate and Reform camps.

Well, the above graph shows that the Liberals managed the debt fairly well, particularly in the Chretien/Martin years. According to this report by Globalfinancial data [pdf], it was the Liberal policies that set the stage for Canada weathering the current Big Recession::
"The increase in government debt [in the 1990s] was clearly unsustainable. The Canadian government was forced to cut back on its spending to eliminate its deficits. Consequently, because Canada put its government finances in order in the 1990s, it has suffered less during the current Recession than other developed countries."
Bingo. Canada is where it is today given the Big Recession because of the Liberals. this doesn't mean to say their policies are always right, but they made sense given the economic context of Canada in the 90s and early '00s.

The unemployment rate in the early 70s was on-par at around 5-7%, so Harper has his history off. The rise in unemployment didn't hit Canada until the 80s. He's also ignoring how unemployment improved dramatically under the Chretien and Martin::
It's not as if the economy tanked, either, under Trudeau. While there was volatility, the area above the x-axis represents growth in GDP::


Examining mortgage rates {I don't have access to historical interest rate data going back to 1968}, rates weren't insane under Trudeau and, a recurring theme, under Chretien/Martin, the rates fell::


I realize that political rhetoric is 99% hot air, but when Stephen Harper the politician makes statements that Stephen Harper the economist should know better than to make, it makes me question whether he thinks people are stupid or if he is—let me rephrase, if he's making ignorant statements based on erroneous statements that he thinks are true.

Twitterversion:: [blog] Setting record straight: Stephen Harper maligns Pierre Trudeau, recasting Canada's economic past #cdnpoli #elxn41 @Prof_K

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