Conference Board: Big Deficit 'price worth paying''

This is from the Star.
The usually conservative free market Conference Board as with most other august free market ideology insitutions swallowing their ideology in order to save the free market as the story goes. Keynes so often an object of derision by the big free market idolators is now becoming something of an idol again.
The infrastructural spending is certainly a progressive move as our infrastructure is badly in need of investment. However one per cent of GDP is not as much as many others suggest is necessary.


Big deficit 'price worth paying'

Canada can afford stint in the red to boost its struggling economy, Conference Board says
Dec 17, 2008 04:30 AM
Ann Perry BUSINESS REPORTER
The federal government should pump $10 billion to $13 billion in additional spending into the flagging economy in 2009 to help pull the country out of a steep downturn, even though it could help push a deficit to $20 billion or more, the Conference Board of Canada says.
In a report titled "Fixing the Recession: Policy Guidance for Canadian Leaders," the Ottawa-based think-tank argued going into the red "is a price worth paying for an expedited economic recovery and a return of consumer and investor confidence in our economy."
It also called for "a well-developed plan to get back into fiscal balance as soon as the economy recovers."
"Fortunately, Canada is in a much stronger fiscal position than most other nations and can easily absorb fiscal deficits over the near term," Conference Board chief economist Glen Hodgson said in a statement.
Fiscal stimulus – essentially, increased government spending – has become a hot-button issue after the federal Conservative government delivered an economic statement late last month that delivered little help for industries hit hard by the global economic crisis, and projected slim budget surpluses.
Since then, Prime Minister Stephen Harper has said his government will have to run a deficit, and appears to be readying a stimulus package for the Jan. 27 budget. Ottawa and Queen's Park are also working on an emergency aid package for the automotive sector.
The report came as Finance Minister Jim Flaherty prepared to meet with provincial counterparts today in Saskatoon to discuss the budget.
The single biggest area of agreement among the finance ministers is the need to speed up and increase infrastructure spending to get the construction sector of the economy moving and creating jobs. Ottawa has $6 billion set aside for 2009 – with Flaherty all but certain to add to that amount in the budget – and is seeking help identifying so-called "shovel-ready" projects.
But some premiers cautioned Ottawa should ensure that other troubled industries, including forestry and agriculture, received their fair share and that governments guard against waste in the rush to spend.
In its report, the Conference Board said monetary policy may be reaching "the limits of its effectiveness" as central banks around the world slash key interest rates.
The U.S. Federal Reserve Board yesterday cut its key federal funds rate to a range of zero to 0.25 per cent, the lowest on record. Last week, the Bank of Canada slashed its overnight rate three-quarters of a percentage point to 1.5 per cent.
"Fiscal policy must ride to the rescue," the report argued.
The Conference Board is calling for fiscal stimulus of no more than 1 per cent of Canada's GDP.

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