“Surplus during recession seems like bad economic planning: Don Pittis” (CBC News)

Don Pittis (CBC News):

If the time for deficit spending is when the economy is in recession, then the Harper government seems to have got it backwards.

According to the latest figures, during the years when Canada was reaping the staggering benefits of an oil and commodities boom, the government piled on more debt. We now know that it was only after the economy began shrinking and needed help that the government squeezed out a surplus.

The current government may not be enamoured of a Keynesian analysis, but whether intentionally or by an error in planning, they have done the exact opposite.

In its best formulation, the intent of Keynesian stimulus is to smooth out the sharp rises and falls in an economy. The government should run surpluses when the economy is booming [and] spend that surplus when the private sector economy is shrinking.

The savings that went into the government’s surplus were accumulated from spring of last year, just before oil prices began their slide from about $100 to about $50 US a barrel. The period of savings covered in yesterday’s budget document continued right through to the first quarter of this year, when a commodities crash caused the Canadian economy to shrink by a little less than one per cent.

And it didn’t end there. Harper has also boasted that he had created a surplus during the April-to-June period, when, as we later found out, Canada had entered a technical recession.

Full analysis here