Mulcair is wrong on the deficit: cozying up to the neocons
Louis-Philippe Rochon
Associate Professor, Laurentian University
Co-editor, Review of Keynesian Economics
Follow him on Twitter @Lprochon
First, it was his enthusiastic support and admiration of Margaret Thatcher; now it is his overzealous support of balanced budgets. What’s next? What is Mr. Mulcair ready to do to get the keys to 24 Sussex? How close is he willing to get to neocons to move in?
It turns out, there is nothing NDP-ish anymore about the NDP. That old party is gone. Buh-bye!
Adrift, rudderless … pick your word, they all describe what the NDP seems to have morphed into under Mr. Mulcair, who seems to have brought the once proud party of social justice to the right. At first, it was done inch-by-inch, almost stealth-like. Many NDP supporters were ready to tolerate this for the sake of unity, but his salivating admiration for Thatcher and now his love of balanced budgets have gone too far.
To many supporters, his latest musings on the deficits will come across as a deep betrayal of something they once held dear: the idea that the State can be transformative. But Mr. Mulcair’s metamorphosis is a shameless political ploy aimed at deceiving supporters, but gaining the respect of others. Where once the NDP played the honoured role of moral compass under Ed Broadbent, they have now become greedy, as polls show their growing support among Canadians. Mr. Mulcair can taste victory, and he likes it. In his quest for power, he has become ready to abandon the core principles of the NDP, and leap over the throngs of core supporters to embrace some aspects of neocon ideology.
But in embracing balanced budgets, Mulcair has also endorsed all the right-wing rhetoric and lies that come with it. On the campaign trail, Mulcair has said in response to Trudeau’s promise of infrastructure spending, “I am tired of watching governments put that debt on the backs of future generations.†Later, he said “Mr. Trudeau seems to have the same approach as Mr. Harper – they both want to live for today and let tomorrow take care of itself … There’s a reason why we want to be good public administrators with balanced budgets, because if we’re not, then we’re not going to be able to have the types of programs that we all believe in going into the future.â€
After my jaw dropped, I rolled my eyes.
In choosing those exact words, Mr. Mulcair has revealed himself to be a neocon wolf in NDP clothing. But he has also revealed himself to be a provincialist politician, with zero knowledge of the role of a federal government, and even less knowledge of economics.
To be honest, I am quite tired of Jonny-cum-lately politicians making these grand and sweeping statements on economics, as if they actually understood what was going on. I am also quite tired of the ‘backs of future generations’ argument, when the reality is quite different.
How do we saddle these future generations of ours? When we spend on education, health care, electrical grids, internet and wifi systems, better roads, better bridges and dams, renewable energy and more, we are leaving them a better infrastructure and a stronger economy. This is not saddling them with anything, quite the contrary, we are ensuring a better future for them. The idea that they will be saddled with debt and will face higher taxes is the core of neocon thinking, a scare tactic aimed at whipping us into docility. If anything, a stronger economy will generate more revenues for the government and that will certainly alleviate the so-called burden of dent.
The problem for our future generations of course is not deficits, but rather a bad infrastructure. Is Mr. Mulcair willing to let our infrastructure crumble? Does he want his grandchildren to inherit a country whose infrastructure is so rotten that it will take 10 times the spending to even bring it back to what it was in the past? That indeed would be saddling them with an even bigger debt!
In a way, Mr. Mulcair wants to shed his party’s image as free-spenders. But instead of taking the position that we must invest in our future, he has chosen the cowardly hide behind the unimaginative coattails of Mr. Harper and the neocons.
The choice on October 19 is becoming increasingly clear. On the right, we have Mr. Harper, who at the very least has been consistent in his support of balanced budgets. But the room is now becoming crowded on the right, as Mr. Mulcair has now crossed over. But unlike Mr. Harper, Mulcair is inconsistent. It’s the old ‘devil we know’ adage.
That leaves only Mr. Trudeau, in the center-left to defend the true values of a liberal and anti-neocon agenda.
I always voted Liberal. For the very first time, I was planning to vote for the NDP. Now, Mr. Mulcair has made me realize that under his leadership, I may have to wait a little longer before switching allegiance.
Splendid piece. It really needed to be said on this website. My faith in the PEF is restored. The rot in the NDP began, though, in my opinion, with Jack Layton’s collaboration with Pierre Ducasse.
Tommy Douglas has 17 Balanced Budgets. Does that tell you something about the NDP way. Google Balanced Budgets political parties. We hate having our children’s, children’s pay our bills.
I am a long-time NDP member and voted for Thomas Mulcair for leader. I fear for my party. My guess is that it might go like this: NDP gets minority government, makes modest social improvements but fails to stimulate the economy which tanks. There is an election within 18 months in which the Liberals get minority of majority status. Business as usual. The NDP is relegated to third party status, Mulcair is gone, and the party does some hard soul-searching.
Ugh! This is so wrong, I don’t know where to begin.
As the PEF has effectively demonstrated in the past, the NDP has been the most consistent party on the provincial level with respect to delivering balanced budgets.
You are doing the NDP a great disservice by spreading the myth and confirming the worst fears of neocons that all the left wants to do is create budget deficits.
Why would the left want to borrow more money from the world’s money lenders and financial elite?
Paying down debt is the first step towards financial independence from these corporate lenders and it’s time we had an NDP leader – ie. Mulcair – that wants to invest in Canada’s people rather than interest.
A balanced budget is easy when you consider the options in front of you. Ending Harper boondoggles like the Economic Action Plan and investing in proper infrastructure, eliminating tax credits for the 1%, curbing military spending, etc and then investing in long-term programs like National Day Care are all possible and just a few OPTIONS a leader has when creating a budget.
“There’s a reason why we want to be good public administrators with balanced budgets, because if we’re not, then we’re not going to be able to have the types of programs that we all believe in going into the future.â€
This quote by Tom Mulcair does not equal support for austerity. Nor does it equal support for Conservative (neocon) politics.
What this article does, is demonstrate of the damage that has been done in the last 35 years in our economic ideology; that a balanced budget implies austerity cut and slash. It’s also concerning that authors like this can no longer tell the difference between balanced budgeting and political ideology.
A balanced budget is just that: BALANCED. The key difference in NDP policy and Conservatives, is social priority.
What do these parties value? Good public administration will balance a budget to meet these priorities.
Liam Young. If you’re referring to Andrew Thomson. He never balanced a budget. Just smoke and mirrors. Google it.
Tommy Douglas did but he did it by raising taxes. Lots of taxes. I actually respect him for them. Balanced budgets are not the Holy Grail. The federal budget represents just 15% of our GDP. We need to relax. Love this post.
Liam: not only do you confuse the situation of provinces with that of the Government of Canada; you don’t even seem to understand progressives objections to Mulcair’s and your shallow narrative. So here is my attempt to clear things up for you:
As the issuer of currency, the Government of Canada can never run out of money and can fund every single social requirement it faces, including free education. It is impossible for there to be a limit on the capacity of a sovereign government to pay debts denominated in its own currency.
For the economy as a whole, in any accounting period, total income must equal total expenditures. The only requirement is, regardless of how many sectors we choose to divide the whole economy into, the sum of the sectoral financial balances must equal zero. For example, if we divide the economy into three sectors – the domestic private (households and firms), government, and foreign sectors – the following identity must hold true:
Domestic Private Sector Financial Balance + Fiscal Balance + Foreign Financial Balance = 0
Note that it is impossible for all three sectors to net save, i.e. run a surplus, at the same time. Some sector has to be issuing liabilities. This is an accounting identity, not a theory. If it is wrong, then five centuries of double entry book keeping must also be wrong.
Those who attack deficit spending are setting up an entirely false constraint. A sovereign government that issues its own currency faces no inherent financial constraints. It cannot produce a financial imbalance. It can buy ANY resources that are for sale in terms of its own currency by using key strokes. That does not mean it should try to buy all the resources, as it can produce inflation in certain circumstances and it can leave too little resources to fulfill the private purpose.
Government needs to use its sovereign power to move just the right amount of resources to serve the public purpose while leaving enough for the private purpose. However, that balance is entirely POLITICAL, not driven by financial need.
1) NDP govts are best in country with no deficits eg Tommy in Sask 17 straight budgets – Libs/Cons run deficits much more
2) deficits = austerity & cuts to social programs & privatization
3) balanced budgets = money for social programs
4) balanced budgets come about due to taxing corporations which ONLY NDP will do
Being a supporter of the Chretien/Marin government was being a supporter of neoliberal/neoclassical economics. They ran against Mulroney then made the Liberal party the Brian Mulroney party.
They cemented in place Mulroney’s reckless income tax cuts for the rich that created a massive deficit. Brought in spending cuts, cuts to provincial transfers, and cuts to corporate taxes that Mulroney could only dream about. Raided the UI surplus of $40-billion (created by their big cuts to UI benefits) to pay down debt. Ran absurdly high budget surpluses. Reneged on their progressive policies: daycare and decriminalization of marijuana.
But aside from that they were the party of true centrist liberal values!
This campaign is no different. The Liberals are right of the NDP on economic issues if one compares platforms. (Of course, few people even bother to gloss over them in bullet form.) CBC’s political compass puts NDP left of the Liberal party. But let’s compare platforms:
Healthcare transfers: Harper cut health transfers by $36-billion with a new formula that is pro-cyclical. Which means funding drops during recessions. That will hit provinces hard but make federal books look good. The PBO says provincial costs now “unsustainable.” Mulcair will reverse cuts, make provincial transfers a priority. Trudeau supports Harper’s neoliberal cuts to transfers.
Carbon pricing. Mulcair vows to bring in carbon pricing. Harper and Trudeau are opposed. After 20 years of being a nation of environmental freeloaders, Trudeau’s idea of “Real Change” is more of the same. His position on the environment is disgustingly neoliberal.
Daycare: Mulcair vows national daycare, which the Liberals promised back in 1993, but are now vehemently opposed to. They support the neoliberal idea of tax-cut daycare. (Absurdly inadequate given the exorbitant costs which make it fall into the category of insurance, not something that should be pay-as-you-go conservative.)
Kim Campbell was right: an election campaign is not the time to have a serious discussion about the issues. Neither is any other time. (One can also see by the lack of critical thinking skills displayed above, by a “progressive” university professor, no less, how economics does not remotely resemble a science.)
While I do think Mulcair has some distressingly neoliberal characteristics, his balanced budget plank worries me far less than his unwillingness to come out against awful “free trade” deals.
Mr. Bergbusch: Sure I’ll grant your unities, but “the private sector” is not a unitary thing. The problem of late years is not governments running or failing to run deficits, spending or failing to spend money, even taxing or failing to tax. The problem is who they’re taxing, who they’re failing to tax, who they’re spending the money for. The problem is class war, or more precisely that the classes the majority belong to are losing the war. So, for the private sector as a whole to be better off in pure monetary terms maybe the government has to run a deficit–but you can certainly rob one wealthy Peter to pay a thousand needy Pauls without running a deficit.
It’s perfectly workable to do far more than Mulcair dreams of in terms of programs to build the economy and redistribute income and social power, without running a deficit. The rich and corporate have plenty of money they’re not using–that’s much of the problem in the first place, after all. Take it from them and use it for useful things, problem solved. Yes, I realize that’s very difficult to do because such a course of action would make the rich and powerful very upset and they are, after all, rich and powerful so they can kick up a big fuss. But it needs doing more than running deficits needs doing.
I believe it is time we grew up. Economical Monotheism needs to be Pluralized. We need more than ONE economy for Canada. It’s time to constitute economic pluralism at a Municipal, Provincial and Federal levels.
Economist Bill Mitchell
http://bilbo.economicoutlook.net/blog/?p=31487
“Austerity is about the spending position of the economic system as a whole. The economy is either subject to a spending gap – where total spending is insufficient to absorb the available productive capacity – and or it is not.
So when we worry about austerity it is because policy choices are deliberately forcing the economy to operate at below potential and mass unemployment is one of the consequences of that policy failure.
Accordingly, when there is a spending gap, the fiscal deficit is too small, given the spending decisions of the non-government sector.
There needs to be more net public spending.
So, discussions about taxing the rich or the corporations to get “money†to match government spending in these cases is rather missing the point.
There is no shortage of ‘money’ per se for a currency-issuing government. One should never tie the spending capacity of such a government to whether some cohort can ‘afford’ to pay more tax.”
Taxes and the Public Purpose
http://neweconomicperspectives.org/2014/05/taxes-public-purpose.html
“….taxes do not “pay for†government spending. Indeed, no taxes can be collected until government has spent. Taxes create a demand for the government’s spending and logically precede that spending.
As we’ve argued, it is neither correct nor politically sensible to
link “give to the poor†policy to “tax the rich†policy. The purpose of
the tax is to free up resources to pursue the public purpose—including anti-poverty programs.
But our tax system is already doing a HECKUV A JOB creating
unemployed resources. We can spend on the poor (and on a full range of other public policies) and thereby mobilize those unemployed resources….
__
Purple Library Guy: Mulcair can be faulted with a number of things, but not coming out against free trade ideology is not one of them.
This nonsense is gospel among most economists whose ideology is often mistaken for evidence-based policy. Paul Krugman recently called Trump a mercantilist for speaking out against free trade. (Yes Trump is an odious man, but that is not the point.)
This polarized view of trade (one is either pro-free-trade or a mercantilist) is demonstrative of the kind of flaky Aristotelian theorizing that passes for economics. All their hypotheses are falsifiable-less, upon which they make absurd extrapolations. (Garbage in; garbage out.) These ideas are like partisan rhetoric: accepted by members of a particular clique (New Keynesian, New Classical MMT, Austrian, etc.) and attacked by other cliques. Nothing is ever settled. Progress is never made. (Unlike in the sciences, which is why the rockets economists design always careen towards the ground and explode in flames.)
The Liberal party is in a position to be bold on the economy and take us back to the successful Keynesian model that created modern living standards during the post-war era (1945-80.) They could come out against free trade and build popular support and win a majority on that alone. But the NDP has to walk on eggshells around the economy or else face blistering attacks from the corporate media (which appeared to kill the Orange Wave in 2011, creating a last-minute Blue counter wave.)
Mulcair is a Liberal. His view on income taxes is idiotic. The top tax rate in both the US and Canada during the post-war era was 70% (until Reagan and Mulroney: back when governments paid their bills instead of borrowing colossal sums to pay out to the rich.) That is his worse mistake in my opinion. (The deficit pledge, second. But it’s malleable enough.)
But he’s the right man to make a breakthrough for the NDP party.
Mulcair is not the NDP, or really representative of what the NDP stands for. If someone wants to vote for a leader who is the party, vote Liberal or Conservative. Their partisans only care about winning elections. The social democrats and centrist liberals behind the NDP are in it to undo the damage caused by 30 years of failed neoclassical ideology. Not a victory dance.
In 1993 Jean Chretian and his Liberals campaigned with their little Red Book of promises. They got elected big time and how many of those promises were fulfilled? Come on people, are you really going to fall for these wolves in sheep’s clothing again! It is high time to give somebody else a kick at the can. Sure Tom Mulcair says he will have a balanced budget. So what! He is a politician trying to get elected. As the late John Diefenbaker pointed out, the first job of a politician is to get elected. You can’t accomplish anything until you are elected. Elect him and give him a chance. Whatever he does it can’t possibly be worse than the Conservatives or Liberals. They have a proven track record and they both have failing grades.
It appears to me that Mulcair’s position is a little more nuanced than you are giving him credit for. He has only promised that the “FIRST” NDP budget will be balanced. He also says quite rightly I think, that the last Conservative budget will be in deficit. So that leaves lots of room for fiscal operations this year because that will be the last Con budget, not his, and he can blame the previous government in the great tradition of new governments.
And so far as I know he has NOT promised to bring ALL of the NDP budgets into balance.
No one seems to ask him, for example, if the probable recession continues will he still balance the first budget or how his government will react to another “unanticipated” GFC.
We are badly served by the press in this election. There should be at least one debate, for example, on economic policies. I haven’t heard about one yet.
There was going to be one, I thought, but Harper was ducking it (like most of them), Mulcair refused to be involved in debates if he didn’t get to beat up Harper, so most of the debates went poof.
Economist Bill Mitchell
“Austerity is about the spending position of the economic system as a whole. The economy is either subject to a spending gap – where total spending is insufficient to absorb the available productive capacity – and or it is not.
So when we worry about austerity it is because policy choices are deliberately forcing the economy to operate at below potential and mass unemployment is one of the consequences of that policy failure.
Accordingly, when there is a spending gap, the fiscal deficit is too small, given the spending decisions of the non-government sector.
There needs to be more net public spending.
So, discussions about taxing the rich or the corporations to get “money†to match government spending in these cases is rather missing the point.
There is no shortage of ‘money’ per se for a currency-issuing government. One should never tie the spending capacity of such a government to whether some cohort can ‘afford’ to pay more tax.â€
___________________________________________
Taxes and the Public Purpose
http://neweconomicperspectives.org/2014/05/taxes-public-purpose.html
“….taxes do not “pay for†government spending. Indeed, no taxes can be collected until government has spent. Taxes create a demand for the government’s spending and logically precede that spending.
As we’ve argued, it is neither correct nor politically sensible to
link “give to the poor†policy to “tax the rich†policy. The purpose of
the tax is to free up resources to pursue the public purpose—including anti-poverty programs.
But our tax system is already doing a HECKUV A JOB creating
unemployed resources. We can spend on the poor (and on a full range of other public policies) and thereby mobilize those unemployed resources….
Another economist who argues his case from inside the box. Following is what is wrong with his criticism of Mulcair! http://www.mykawartha.com/opinion-story/5822132-the-myth-of-the-balanced-budget-narrative/
This is why Louis-Phillipe Rochon is wrong.
The Myth of the Balanced Budget Narrative
The myth of the balanced budget dominates the media in order to manufacture the consent of the public thus enabling those in power to maintain their privileges and entitlements. Myths also obscure reality.
All the political parties used to wring their hands about balanced budgets, debts and deficits until this past week when the Liberals called for deficits. But nobody, especially the media, talks about the amount of interest being paid on the debt, to whom that money is paid, how much of it is taxed or what happens to these amounts when the interest rates start to rise again. Some commentators note that 10 cents of every tax dollar goes to service the debt but what is that number in real dollars and what will happen to it when the interest rates climb again?
The latest ploy to manufacture consent for this myth is to cite David Dodge and Paul Martin who support a deficit budget by citing the IMF practice to describe the debt as a percentage of the Gross Domestic Product (GDP). More obfuscation.
NDP values should lead it to expose how even balanced budgets transfer taxpayers’ dollars to the financially well-off in the form of interest on the debt, but it doesn’t (although locally Dave Nickle gets this). Instead, the NDP talks about balancing the budget by raising taxes and cutting subsidies to the big corporations (who failed to invest previous tax savings granted by the Harper government) and by reducing taxes for the job-creating small businesses. They hope that with more people working, more taxes will be paid without increasing the rates thus balancing the budget. It does make sense especially when you realize that the increased prosperity all three parties are promising will bring on higher interest rates.
But what would happen if the BoC held the entire debt? Because the BoC is owned by the government, the interest ($25.7 billion this year) would be returned to the government and then be available for infrastructure, programmes and services without any increase in taxes. If the BoC held 20-25% of the present debt as it did prior to Trudeau senior’s rule, there would be over $6 billion dollars available.
What happens when interest rates go up? If the entire debt or part thereof is held privately, then the well-off get another windfall from the taxpayers even if the budget is balanced.
The myth of the balanced budget narrative obscures how the privileged benefit at the expense of the rest of us!
sadly not many here are actually getting the point that we are in the biggest stagnation since the great depression- and the economy is holding on to one hope for a lift- the US economy. And that is to barely maintain the sad state of affairs that has become of the economy. From lost manufacturing capacity- a failed fossil fuel energy strategy, and now a consumer debt bubble that the incomes of millions is pinned on the idea that housing markets can rise while wages fall.
Deficits can be used for much more than burying dollars bills in a deep mine and digging them up.
What is needed is a MMT rethink of the economy- save for a small country like Canada can only do such in conjunction with say a larger country like the US. And of course they would never let us in on that action- as they have derived their own form of MMT called QE for the banks.
So what alternatives do say a government such as Mulcair have given the circumstances of being joined to a global financial market that will destroy your economy if you go against the prevailing winds.
The only way forward- is to unleash a renewal process that runs a modest deficit. It will take new money to transform the economy out of the oil economy and restore, rebuild and re-invent some industries. There are many areas that are ripe for such- but it will take some government, money, infrastructure and guidance.
The key is growing a new economy- and I am working on a new paper for such. The world economy is massive- we are but a small, educated, and knowledge oriented economy. Of all the economies caught in this global slump- we stand the best chance for leading the change to a new economy.
Stay tuned for an update on this economic renewal paper. It is and will be the future- whether it is this economy or somewhere else- I will gurantee you this- it will be the future.
Focused on smart machines- clean energy- smart services- safe and certified food and lastly- the new worker- that which can work with and control the new machines- and not vice versa.
From forestry products that serve the textile industry- to a food industry that can produce some of the safest, and nutritious food- to a manufacturing sector that can adapt and overcome the threat of cheap manual labour through intelligent machines and smarter workers, to finally a new energy sector that is built on the new while it transitions from the old. We can do this- but it will take strategic investment in several key sectors and subsectors- as well as some very intensive investment and transitions within the learning assets of this country.
And it will undoubtely create some temporary deficits.
Paul Tulloch
http://www.livingwork.ca
I’m not an economist — I’m a writer so I’ll confine my criticism to Mr. Rochon’s rhetoric: “First, it was his enthusiastic support and admiration of Margaret Thatcher; now it is his overzealous support of balanced budgets. What’s next?” Given that Mr Mulcair’s comments on Margaret Thatcher were made in 2001 and his support for balanced budgets in 2015, on Mr Rochon’s timeline we might just have to wait until 2029 to find out what is “next.”
Mr. Reiss: So you think that the policies of 2001 are not affecting us today, or that today’s policies may not still hurt us a decade hence? Does it not trouble you that the sort of deregulatory policies put in place by Thatcher and her followers, and so strongly defended by Mulcair, contributed, indeed some would say caused, the Great Financial Crisis and Recession? Policies such as Clinton’s balanced budgets in the late 1990s, or his support for the repeal the Glass–Steagall Act (or crucial sections thereof) are indeed having deep, long-lasting and catastrophic repercussions today. Mulcair, with his balanced-budget mantra, promises us similar long-term problems.