This article is not supposed to be definitive in detail. Like, for example, the budget section of a party’s election platform. Look at it rather as a general discussion of the choices available to government in the spending of taxpayer dollars during a recession.
Okay, let’s say I’m the federal government and we’re in a recession, so I decide to spend some money to stimulate the economy. Let’s say a billion dollars, just for fun.
What should I do?
Choice A: Tax Breaks for a Big Corporation
So I have a multinational (let’s say Volkswagen, for sake of argument) who agrees to set up a factory in my country for a nice round billion dollars of tax breaks and incentives.
What do I accomplish?
- I have created a certain number of high paying jobs, which is good. I have also created an equal number of hostages, who will be used with great glee down the road when said multinational wants more breaks. “Give us tax breaks or we’ll go somewhere else.” Where have we heard this before? So these jobs aren’t as permanent as they sound, and depend on a continued level of government expenditure.
- Do I have spinoff industry? Maybe, but the free trade agreements mean that outsourcing has worldwide competition.
- And government renues? Between the tax incentives and the tendency for profits to leak away to head offices in Brunei or the Turks and Caicos, I end up with nothing.
- Likewise, the Canadian public, with the exception of the loyal riding that elected one of my party members and was rewarded with the factory, ends up with nothing but the pollution created. And a small number of rich people getting richer.
Choice B: Infrastructure Spending:
I spend my billion dollars on roads, bridges, and alternate power sources.
What do I accomplish?
- I have created a certain number of high paying jobs, which is good. They are temporary, which is bad, unless I keep infrastructure spending going. Which is good for the country.
- I have created a better infrastructure, which all Canadians can enjoy. Especially Canadian businesses, big and small. Word going around is that alternate power sources can be a great source of income. Remember how much money we made worldwide on the Candu nuclear reactors when they were in vogue?
- I have created a country with world-class infrastructure, which attracts investment, which creates jobs.
- And government revenues? They will slowly increase as the new investment comes.
- And the people of Canada have better travel, communications, less pollution, and more jobs at all levels.
Choice C: Social Spending:
I spend my billion dollars on hospitals and social programs.
What do I accomplish?
- I have a healthier population: physically, mentally, and socially.
- Health care costs less, (well, let’s be realistic; cost increase at a slower rate) because healthy people use less health facilities, and diseases caught early cost less to treat.
- Nobody would dream that the government is going to make any money on this one, but the money spent will do the most for the people of the country. Which is, after all, what governments are supposed to do, aren’t they? Well, aren’t they?
- I have increased productivity, because healthy people work harder and lose less to down time.
- I create jobs in Research and Development and market our products worldwide (Canada has developed one of the best Ebola vaccines, for example).
- Government revenues will only expand with the increase in workers’ incomes. But expenditures will decrease. Or at least not increase so fast.
- Oh, and the disturbed people that might go out and shoot someone will get proper treatment and be cured, maintained or contained instead.
Choice D: Oh, Yes, I Forgot.
Don’t spend anything, because it looks better at election time to show a balanced budget.
And for the Canadians reading this at election time, that’s pretty well the economic platforms of the three leading parties. It’s your choice, folks. Come next Monday, get out and vote. For Amercians, you have a whole year to figure out which political party is really going to do something for your country.