The Policy Issues we Should be Discussing

The coalition did bring change, not necessarily the change that was expected, but an important change nonetheless, stability in the leadership of the Liberal Party. And now that Michael Ignatieff is in place, it’s essential to return to the policy issues that brought the coalition into being, namely the nature of the economic stimulus package and appropriate funding for political parties.

The neo-Keynesian position on economic stimulus – espoused by this year’s Nobel laureate in economics Paul Krugman, 2001 Nobel laureate Joseph Stiglitz, and senior Obama adviser Lawrence Summers – is that monetary stimulus and tax cuts won’t be sufficient to bring the global economy out of this recession. Monetary stimulus isn’t being passed along by the financial intermediaries, which are using the infusions of government money to shore up their own balance sheets. Tax cuts would go mainly into savings, as happened last spring in the US. That leaves fiscal policy to do the job of taking up slack and priming the pump for a private sector recovery.

I suggest three criteria for choosing spending projects: speed, efficiency, and effectiveness. In general, there is a tradeoff between speed and efficiency (spending no more than necessary for a project), but now excess capacity should hold down input costs. Smart procurement policy can create incentives for starting quickly and timely completion. The most important criterion is effectiveness, by which I mean defining great things that we, as a society, can do together.

The problem with entrusting the responsibility for fiscal stimulus to the Harper Government is that it’s just not in their DNA. The Conservatives don’t respect the public sector and have no vision of societal projects; they just want to give money back to taxpayers. Barack Obama’s speech about his stimulus package, delivered on YouTube last Saturday, exemplifies a leader defining a vision and outlining the projects that flow from it. (Notice that one of the projects, connecting all schools and libraries to the Internet is something the Chretien Government did over a decade ago.) By outlining a visionary and vigorous fiscal policy, the Liberals would define themselves as a clear alternative government, ready to contest an election early in the new year. Here are a few areas I’d suggest:

• Energy efficiency and alternative energy
• Enhancing public transit, in particular by implementing road pricing in larger cities
• Improving the delivery of government services
• Education, particularly reskilling, and research
• and that Conservative b