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Catholic thought mixed on political wisdom of deficit spending

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  • March 23, 2016

OTTAWA - As Canada enters a new round of large budget deficits and rising federal debt, Catholic social teaching provides no straightforward answers on the wisdom of deficit economics.

“The Church is quite wary about blanket statements of the ethics of deficits,” said Citizens For Public Justice executive director Joe Gunn. 

The question has become suddenly relevant as the Liberal government unveiled an inaugural budget founded on deficit spending that greatly exceeds what the party platform outlined during last year's election. Prime Minister Justin Trudeau had promised to invigorate the economy through spending and said his first budget would cap the deficit at $10 billion. But the Liberal budget, unveiled March 22, shows a deficit in the range of $30 billion for the coming year.

Trudeau also promised last year that deficits would be short lived and his government would balance the books before the next election. But with Canada's resource-based economy hit hard by a sharp world decline in oil prices, balanced budgets by 2019 seem unlikely, which means new rounds of borrowing to add onto a national debt that already tops $600 billion.

While there is a long history in the Church of suggesting usury is a sin, the view of charging interest has changed over time, Gunn said. “Generally, the way to look at these issues is trying to understand the specific situations and making a moral judgment based on the specific circumstances."

Although the national debt is at record levels, Gunn argues that it might not be as bad as it appears.

“You look at two things: the quantity of the debt and the quality of the deficit spending," he said. "So if you’re looking at the quantity of the debt, you would be guided by the debt to GDP ratio, the size of the debt related to the size of the economy. For the federal government, it is lower than it’s been since 1995, when we were in a big pickle.”

On that basis, Gunn believes "there is room for deficit spending this time around.” 

“But I wouldn’t turn that into a once-and-for-all statement that we can always say deficits are fine,” he said. 

Cardus director of work and economics program Brian Dijkema said it is not always easy to “draw a straight line to a specific policy” from Christian social thought. On debts and deficits, there are a few principles at play, he said. 

One of them is what Dijkema calls "an inter-generational reality." Governments should be be wary of incurring debt that can "unduly burden future generations.”

“Ideally, if the government is going to increase debt to stimulate the economy it should be doing so in ways that enhance greater productivity in the long term,” Dijkema said. 

If stimulus money is spent on better transportation, public works such as bridges, and improving community infrastructure, “an argument can be made” that government is “taking advantage of low interest rates and spending” on projects that will make it “better for Canadians down the road.”

The question is ‘how likely is that to happen?” or ‘how good is the government in doing that?’ Dijkema said. “I’m not convinced either the Liberals or the Tories are good at doing that," he said.

Economist Fr. Bill Ryan of the Jesuit Forum for Social Faith and Justice said the general Keynesian principle is “when the economy is going well, you should run down your debt.” When the economy is struggling, when people are unemployed, then fiscal means should be used to stimulate the economy.  Lowering interest rates no longer works, since they are so low and there’s not a proven link between helping the economy and lowering business taxes, he said.

The main concern in deficit spending is the need for long-term consideration in spending priorities, he said. “Unfortunately our elections are short term.”

Thus decisions are made based on elections and not economics, he said. As with most countries, Canada needs long-term investment to renew aging infrastructure such as roads, sewerage and bridges, he said. “Our infrastructure across Canada is falling down.”

In terms of the quality of deficit spending, one of the biggest spending envelopes in the budget is the new Canada Child Benefit. Gunn said most ethicists would say this program was “a good thing” in terms of its lowering “the incredibly high level of child poverty in Canada.” It could lift 300,000 children out of poverty, he said.

Ryan also believes Canada has to pay attention to income distribution, so that new wealth does not only go to people who are rich. 

“The best way is to put money in peoples’ hands, to give people jobs,” he said. 

In Catholic social teaching, said Ryan, the main consideration is, how does it affect the poor? If in avoiding a deficit or paying off the debt, the poor will suffer, then that has to be kept in mind.

It's important to consider future generations, but the government must prevent the present generation “from being angry, revolting or going more and more into poverty. It’s a balancing act,” Ryan said.

Comments (3)

This comment was minimized by the moderator on the site

Up to reformation, the church stood against the borrowing of money by government, kings, ect. for the debt lies on the backs of the workers, most directly, to war, conquests of others that money is borrowed for. The Europe and US, and Canada is...

Up to reformation, the church stood against the borrowing of money by government, kings, ect. for the debt lies on the backs of the workers, most directly, to war, conquests of others that money is borrowed for. The Europe and US, and Canada is in a bubble of ignorance slavery, ans. DEBT..

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lyle
This comment was minimized by the moderator on the site

During the Roman time, the poor went off and won the wars, but when they returned to farms in ruin, they still owed debt, and lost the farm, as the rich needed money to pay for the Roman wars, the peasants won, but lost their land in they were in...

During the Roman time, the poor went off and won the wars, but when they returned to farms in ruin, they still owed debt, and lost the farm, as the rich needed money to pay for the Roman wars, the peasants won, but lost their land in they were in debt after. Debt, makes slaves of the people.

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lyle
This comment was minimized by the moderator on the site

The US debt of 19 trillion is a crime agasint humanity, the US is spending $666 b. 2016, on arms, 50% of World total, when its recognized war is murder, one cannot both prepare for war, and prevent murder, the US is full focus to murder, based on...

The US debt of 19 trillion is a crime agasint humanity, the US is spending $666 b. 2016, on arms, 50% of World total, when its recognized war is murder, one cannot both prepare for war, and prevent murder, the US is full focus to murder, based on a bigotry of the Islamic.

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lyle
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