Don't Make Canadians Poorer
In short, because the price of oil has fallen, Canadians as a whole are somewhat poorer than if the price had not fallen.
What should government do about this? Not make them poorer. Wasteful government spending is bad enough when the taxpayers who pay for it are doing well. It’s even worse when the taxpayers are worse off than they were.
Unfortunately, government officials are often very much like the politician in the British comedy “Yes, Prime Minister.” They say, “Something must be done. This is something. Therefore it must be done.”
This is from my recent blog post at the Fraser Institute sight.
Here’s part of my reasoning:
When government spends on infrastructure, it doesn’t use market signals that tell where money is best spent. So the government is flying blind. This means that the odds that even the most well-intentioned government officials will spend it better than people would spend their own money are vanishingly small.
It gets worse. Government officials have perverse incentives because they are spending other people’s money. People spend other people’s money more carelessly than they spend their own. The result–the odds that the money will be spent well are even closer to zero. More government spending will make Canadians poorer. When you’re poorer, it’s even more important not to waste resources.