Sunday, January 04, 2009

Fiscal Stimulus Part 5: Liberal Strategy

Using the threat of a coalition government, we were able to stop the insanity and force Harper/Flaherty to finally admit the necessity of a fiscal stimulus. Now the question is: What will they propose as the details of the stimulus? And how should we respond?

If the stimulus package looks like it has a reasonable chance of being effective, then I think we should support it. But there is a good chance that the ideological obsessions that led Harper to deny the need for a fiscal stimulus will now lead him to create an ineffective fiscal stimulus. He very well might use this opportunity as a blank cheque to follow his own agenda, regardless of how effective it will be in stimulating the economy. If the stimulus doesn't work, he can always blame it on the Liberals who forced him to do it.

That agenda might contain corporate tax cuts and across the board tax cuts, even though it is widely understood that tax cuts are not an effective stimulus. It might be stuffed with pork-barrel spending targeted at winning Conservatives more seats.

The problem is that Harper doesn't believe in fiscal stimulus. His heart isn't in it. He may very well come up with a budget that doesn't help the economy - but pretends to. Flaherty already seems to be telegraphing that strategy.

Do we have a response to that scenario? It always seems to come back to the need for effective PR. We need to have not just a correct response, but a convincing response.

See also:
Fiscal Stimulus Part 1
Fiscal Stimulus Part 2: Size
Fiscal Stimulus Part 3: Federal Spending v Tax Cuts
Fiscal Stimulus Part 4: Deficit Implications

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