Harper, maybe Campbell, decide deficits OK

The world has changed. Stephen Harper is acting like a Liberal, leaping into budget deficits and tossing cash around to win votes.
Even Gordon Campbell, who three months ago called deficits a dangerous "addiction," now says B.C. might have to break its balanced budget law next month.
These are signs of how dramatic the economic crunch has become, how badly politicians under-estimated the problems and how worried both leaders are about election prospects.
Harper's budget called for Ottawa to spend $36 billion more than it takes in this year, ending a decade of balanced budgets. (The deficit is forecast at $30 billion for the following year, but that estimate is about as reliable as a $4 watch.)
Spending will jump 10.8 per cent, at a time when inflation is almost non-existent. Revenue will fall by 4.2 per cent, thanks in part to tax cuts.
The rationale is that the government spending will take up some of the slack in the economy. If people are laid off in the forest industry, maybe they will get work on a road infrastructure project.
There is broad agreement among economists that government intervention of this type is necessary in a serious economic slowdown to cushion the impact and hasten the recovery. That almost inevitably means several deficits.
On balance, the government's direction is sound.
But it's the details that should make you nervous.
This is all an inexact science. Few economists will hazard a guess about the real effect of the programs - how much the billions will add to economic output or reduce the jobless rate.
And once the money starts flowing, it's hard to keep track of where it's going or how wisely it's used.
Some stimulus measures make obvious sense. If a bridge is planned for construction in five years, building it now creates jobs and provides needed infrastructure. In five years, the theory goes, the economy will be stronger. The money that would have been spent on the bridge can be used to pay down the debt run up in the deficit years.
Other measures are questionable. The government has promised $160 million in new spending on cultural projects. It's hard to judge the real economic value of that spending - except in make-work terms. And it's harder to see how the government can avoid pressure to keep up the commitment once begun.
And it's committing $3 billion this year to subsidize home renovations and landscaping. That doesn't qualify as smart spending - there is no gain in productivity or long-term benefit. (In contrast, social housing for low-income serniors, the disabled, natives and northerners gets about $500 million this year.)
And some measures are just foolish. The income tax cuts announced in the federal budget aren't targeted to create jobs or improve our long-term situation. While they are nce, they are not going to bring a spending rush to stimulate the economy.
And the $4 billion in foregone revenue over the next three years will now be borrowed, for us - or our children - to pay back at some point. But the cuts will score some political points.
The budget marks quite a transformation for Harper, whose political career has been built on an abhorrence of deficits and rejection of this kind of interventionist role for government.
Gordon Campbell might be having the same kind of conversion. His government made deficit budgets illegal in B.C. Even a few months ago, when he outlined the province's initial response to the meltdown, Campbell pledged the province would remain "a deficit-free zone."
But this week, with the provincial budget less than three weeks away, Campbell told The Globe and Mail he's not sure the government will be able to balance the budget.
That's a big reversal. But probably a wise one - depending, of course, on the prudence and effectiveness of the economic stimulus measures. An ideological aversion to deficits shouldn't become a straitjacket. Families sometimes borrow to get over tough patches; governments have the same opportunity.
Footnote: Politically, I have no idea what the impact will be in the provincial election May 12. Campbell could look a little hypocritical in embracing once unthinkable deficits, if it comes to that. But that's likely better than looking detached from the economic problems affecting so many families and communities.