This Old Economist: How will the government respond?

A new poll for Royal Bank Canada (RBC) has revealed two things we may already know but it made me think about ‘government response.’

(Not that I’m in charge of government response. Forget it. Sometimes I don’t even hear my wife call me for supper. And I really like supper).

Here’s what the RBC poll revealed:

First, “consumer confidence in Canada has dropped significantly amid growing uncertainty over the economic recovery” (Oct. 2, London Free Press)

(The bank’s recent consumer outlook index dropped from 108 (the mark since Dec. 2009) to 94. Don’t ask me what it takes to get a mark of 94 or 108. All I know is, if I’d had a score of 94 in my university courses in the ‘60s and ‘70s I’d be doing brain surgery every morning and jetting to Paris for supper every evening. Sorry, I digress).

Second, “mounting debt continues to weigh on the mind of Canadians.”

In other words, all across this fair land people are aware of uncertain economic times around the world and that we’re standing up to our armpits in personal, provincial and national debt. Some people might even be aware that the US of A is even in worse shape and has us in its back pocket. If it sits or falls done we’re done like dinner. (And I like my dinner too).

So, how will our government likely respond to these heavy details?

Will they hope - above all else - that our economy will turn around so it can be driven as in the past and we can all get back to business as usual?

Will they consider stimulating or manipulating the economy in some way, e.g., with stimulus dollars, or with money that is sitting on a shelf somewhere, or with a new tax policy? (Corporations are still over-taxed, aren’t they?)

Will they beg people to spend their savings so we can get back to being a consumer-drive society again? (60 - 70% of the Canadian economy is reliant upon consumer or sump pump spending).

In the opinion of this old economist (my university degree is hermetically sealed and taped to the back of my energy-efficient furnace), I think the government will go with the first two ideas because the members know, as well as anybody, most Canadians don’t have any savings.

Whatever you do, don’t hold your breath waiting for any government to start encouraging people to live in smaller homes, buy less furniture, drive smaller cars, eat less street meat for snacks (and I like snacks too) or think about converting to a lifestyle about 80 per cent of the size we have now - even if it would help the situation.

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Important additional information: I like snacks but haven’t had street meat in so long I can’t even remember what it smells like, though the words ‘hot nitrates’ do come to mind.

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