Last week, Canada elected a new Liberal Prime Minister, Justin Trudeau, who has vowed to massively boost public spending and run several years of deficits, arguing that the “infrastructure deficit” is bigger than the fiscal deficit. He claims that such stimulus spending will spur economic growth.
But in the video below, economist Stephen Davies looks at recent Canadian history – as well as that of other countries – to explain that the exact opposite is true: economic growth occurs when governments cut spending. He says that Canada, whose economy rebounded after significant public sector cuts in the 1990s, is the “obvious case.”
That’s because cutting public spending means that money that otherwise would have gone to the government becomes available for productive purposes that create more wealth and a higher standard of living for everyone.
In other words, like their currency, Canada’s new plan is downright loony.