Contrary to the voices calling for major ‘stimulus spending,’ that is precisely the wrong way forward,” said CTF Federal Director Aaron Wudrick. “That unfortunate response to the nine-month long 2008-09 recession was to plunge the federal government into seven consecutive deficits and added more than $150 billion to the federal debt – in spite of the fact the economy was already out of recession by the second half of 2009, before any stimulus funds were spent.”
Wudrick noted that even if one were to accept that deficit spending was appropriate in the case of a severe economic downtown, the current mild recession does not justify any such course of action.
“The reality is that the recession of the first half of 2015 is a baby recession compared to 2008-09, in which the economy shrunk 2.6 per cent over 9 months, and that one was less severe than recessions in 1990 (-3 per cent) and 1981 (-4.6 per cent). Indeed, for all we know the recession is already over, as June numbers showed growth of 0.5 per cent” said Wudrick. “We encourage the Conservatives and NDP, who have pledged balanced budgets, to stay the course, and hope that the Liberals will reconsider their ill-advised pledge to run $10 billion deficits.”
A 2010 Fraser Institute study concluded that government spending and infrastructure investment contributed only 0.2 percentage points to the change in GDP growth between the second and third quarter of 2009 and nothing between the third and fourth quarter. Similarly,
a 2010 survey by the Parliamentary Budget Office was unable to conclusively identify how many jobs were created as a direct result of deficit spending.
Aaron Wudrick, CTF Federal Director
