Conservatives call for spending cuts amid economic downturn – economists disagree
Conservative MPs have taken the recent global economic downturn as an opportunity to roll out a new line of attack against the Trudeau government. They allege that the Liberal’s public spending has left the national “cupboard bare” in the face of economic uncertainty. The federal Conservatives are now calling for public spending cuts as a remedy.
Economists – however – say the Conservative request is not only unnecessary, but it is also dangerous.
Kevin Milligan, an economics professor at the University of British Columbia, refutes the notion that the “fiscal cupboard is bare.” According to Milligan, the Canadian government is well-positioned to respond to a recession situation.
The Government of Canada has the fiscal capacity to handle the present macro challenges.— Kevin Milligan (@kevinmilligan) March 10, 2020
Any notion that the 'fiscal cupboard is bare' is irrefutably, absolutely, 100%, 180 degrees wrong.
Let me offer 3 points of evidence.
Jean-Francois Perrault, the chief economist at Scotiabank, also refuted the Conservative talking point.
.@ScotiaEconomics Jean-François Perrault said he’s anticipating significant stimulus in the federal budget. “At least a per cent of GDP maybe two, so 20 to 40 billion dollars…there’s not really any point doing anything less than that.” #cdnpoli pic.twitter.com/YuXWol6Nsq— Power & Politics (@PnPCBC) March 10, 2020
His colleague, Brett House, the deputy chief economist at Scotiabank reiterated the sentiment. “With interest rates at current levels, literally all of the federal and provincial governments in Canada can afford to provide additional fiscal stimulus to counter the oil price shock & coronavirus outbreak.”
Most experts prescribe the exact opposite of what Conservatives are calling for. During an economic slowdown, fiscal stimulus – that is increased public spending – is needed to give a boost to the economy.
The federal Conservatives’ calls for public spending cuts not only fly in the face of expert knowledge, but they could also make a bad situation much worse.