Economic Illiteracy and the Crisis in Canada

One of the real frustrations of watching the current crisis from Canada is seeing the lively and informed debate taking place in the U.S. and contrasting it to the tired rehashing of threadbare ideas that so often passes for informed comment here.

A case in point is Jeffrey Simpson's column in today's Globe and Mail. The column, entitled What Obama's Bold Budget Means for Canada lays out some of the highlights of the first Obama budget, and in the case of environmental initiatives, suggests some cues Canada might follow.

So far, so good.

His argument then turns, however, into a somewhat hectoring lecture on the evils of deficit spending, where he suggests that such shortfalls are the result of mere political expediencey, and that

[t]he cash Americans need is at hand, at home, if they were willing to tax themselves more to get their country away from mounting debt, to balance the country's books, and to finance the programs and regulations most of them want (apart from the Republican right.) Such truths, apparently, are too hard to bear, even if the truths are self-evident, as Americans like to say.

Now, you might or might not agree with fiscal stimulus as a means of restoring a vital economy (and helping those in need), though it is surely harder to disagree when monetary policy has so obviously hit the 0% wall. But the whole point of fiscal stimulus, and this is what the Obama administration is pursuing, is deficit spending. This is a settled question. To offset spending with increased taxes is to go nowhere. And it is this lack of simple understanding -- of economic literacy -- that is particularly discouraging.