Article: http://www.theglobeandmail.com/servlet/story/RTGAM.20090302.wgdp02/BNStory/National/home
Summary
The article I have selected is on an interview with Canadian Finance Minister Jim Flaherty with The Globe and Mail. Mr. Flaherty states that he expects a “sharp, substantive drop in GDP” for last quarter and the next from Statistics Canada. Along with Mr. Flaherty, many economists have predicted a 3 or 4 percent drop as well. The finance minister suggests that through the GDP figures, the stimulus-spending of $3-billion needs to be quickly enabled by the opposition MPs. Without the spending, Mr. Flaherty fears for a “longer, deeper recession for Canada”, which would subsequently damage Canadian families and businesses. Though Liberal finance critic John McCallum believes time is still available for the government and the opposition to decide on the distribution of the spending.
Connections
The connection between this article and chapter 6 is government spending and the Keynesian economic theory. Government spending helps increase GDP through putting money into businesses, which can then provide income to its workers. The workers can then use that income, putting back the money into the economy. This relationship between income and consumption can be seen in the circular flow of money. The Keynesian economic theory, where John Maynard Keynes proposes that the government takes an active role in the economy, includes government spending. This spending would help support demand for goods and services, therefore preserving employment. In this case, the $3-billion spending will help our current economy get out of or at least stall the effects of the current recession.
Reflection
With the current state of the economy, government spending would help keep up employment in the country. As seen in my previous entry, unemployment rates in the province of British Columbia, Ontario, and Quebec is increasing. The decrease in employment would most likely drop Canada’s GDP, resulting in further unemployment. By stimulating the economy via spending, there will be more money circulating around. More money means more products and services can be bought. The increase in demand would be matched with an increase in supply, creating more jobs and money in the market. Because of this, I agree and support the spending and would like to see it implemented as soon as possible.
4 comments:
I strongly agree that the government should spend money to stimulate the economy. Since the provinces of British Columbia, Ontario, and Quebec have unemployment rates increasing, governments should think of ways to create more job openings. If there are more job openings, the public are more confident in spending which helps the economy. I agree that more products and services being bought would trigger more jobs and money in the market. In addition, I believe government’s spending on infrastructure is the best way. It can benefit in short term and long term. In the short term, jobs can be created and in the long run, the public would benefit from the new infrastructure.
Michael Li
Block F
The root of the problem in this recession period lies in the faltering levels of consumer spending. Indeed creating more jobs with a stimulus package may boost income levels in the population which would result in high consumer confidence. Cutting interest rates like what the Bank of Canada has done, may not help because people are still more inclined to save when there is a recession and future levels of income remain uncertain. There is a chain reaction associated with the economy, that being if more employment opportunities are created, the more investment will occur which stimulates the circular flow of money in the economy. GDP will increase as a result. Mr Flaherty and the Canadian government should not rush in immediately pushing the $3billion stimulus and figure out a way to distribute the money effectively. It is also concerning that western Canada is also beginning to suffer significant setbacks, with more engineers and construction workers being laid off. This proves that investment levels should be increased in order to boost demand and contribute to the circular flow of money.
J.Tam
Block F
I agree with Canadian Finance Minister Jim Flaherty to act quickly to enable the $3 billion stimulus package before Canada gets into a deeper and longer recession. With the GDP of Canada contracting at an annualized rate of 3.4 per cent last quarter, government spending is necessary to protect the jobs of Canadians and create jobs. More employment renders more spending in the economy, meaning more goods and services will be produced to prevent Canada’s GDP to keep falling. I believe that a way to keep Canada’s GDP from posting negative numbers is that the government should spend a large part of their stimulus package to accelerate current construction projects. For example, the federal government should fund more money into projects like the Olympic Athletes Village and Canada Line, so that more workers are hired and the projects will be completed earlier. Spending money on new projects like the Evergreen Line will not help Canada from recovering from a recession as it might take several months in order for workers to be actually hired to start the building process. With the development of the Olympic Athletes Village and the Canada Line already well under way, it is a guarantee more workers will be hired if the government spends more money into these projects. After these projects are completed the federal government should then start to focus on the new projects. Higher employment from the projects means more spending is expected, in turn more money will flow in the economy. As the economic conditions of Canada continue to worsen we can’t waste any more time in getting the stimulus package out to Canadians.
Jason Tong
I find it funny how people are saving their money fearing that they are next to get laid off but at the same time people are getting laid off because of the people who are saving their money. I believe that the stimulus package will get us out of this tight situation. With more jobs being created, people would be less worried about their future income and would be spending money instead of saving it. The $3-billion stimulus package shouldn’t be spent thoughtlessly. Most of the money should be used to get people to spend money while the other half should be used to prevent this from ever happening again. We shouldn’t just stimulate this or bail out that whenever we are faced with a crisis, instead we should prevent the crisis from happening in the first place by making smart decisions.
E.li
block F
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