So it turns out the experts didn't actually know what the economy was going to do after all. No really. Thomas Homer-Dixon said it so it must be true. Gosh. I guess we'll all be driven back to hoping for the best and preparing for the worst by keeping ourselves flexible, spending less than we earn and trying to diversify our savings in case life has unexpected ups and downs. Weird.

As you sit amid the wrapping paper and debris on Boxing Day, picking your teeth with a wishbone, I want to ask: What if that was it? Would it be enough?

I don't mean what if you were struck down tomorrow, or if you never saw another Christmas pudding consumed by flames. I mean what if, from now on, there were as many gifts equally good (or tacky) and the same Christmas dinner, in houses as nice and warm as this year and so on, but not more. Would Christmas still be worth it?

OK, hands down all the Grinches who think it's not worth it now. This is a thought experiment about public policy, not odd seasonal customs. And there is a curious cross-party, trans-ideological consensus that the answer to my question is, "No! Certainly not! If things don't keep getting better it's all just dust and ashes."

Seriously. Look at political manifestoes and punditry across the spectrum and you'll discover that no one even debates wealth. All they talk about is growth. Public discussion takes place as if it were incontrovertible that a man with $400 million would be unable to sleep nights were he not convinced next year he'd have at least $412 million.

I realize, incidentally, that this man had $700 million back in August and will be lucky to reach Easter with $200 million while the rest of us worry that we won't be able to afford needles next year, let alone trees. And I certainly hope things get better not worse. I'm not advocating penury as a solution to a slump. My view of voluntary poverty is that it's fine provided it's voluntary. All I'm saying is that there's something very peculiar about the way we frame public policy questions and this peculiarity risks extending deep into our personal lives.

Consider this throwaway line from a recent Fraser Institute book on taxation: "Economic growth is a widely used indicator of an economy's health. It is measured by the annual percentage change in a nation's gross domestic product (GDP)." I cite it not because I think the Fraser Institute folks are weirdos but because whatever their sharpest critics might find to dispute in this book, they'd get to the substance used for the binding before picking on this line. Why?

I'm not against wealth and gadgets and should confess up front that I currently own the coolest car, and phone, I've ever had. My current vehicle is cooler than all the other cars I ever owned put together. So is my phone, now that I come to think of it. And my laptop.

If gains in wealth bought as much happiness as you'd expect then people in the Middle Ages should all have been so miserable they'd have committed suicide if anyone had rope.

But if money could buy happiness it should have by now. King Henri IV of France supposedly said he hoped to see the day when every peasant had a chicken in the pot on Sunday. Fine. They do. What is the aspiration nowadays that requires us not simply to preserve what we have but to keep stuffing fowl into the pot until it bursts?

There is a legitimate national security impulse to have more and better stuff than your enemies. And dynamic growth will probably bring medical advances that matter enormously to those they affect. But not, surely, quality of life elsewhere. Must every book we get for Christmas be bound in Corinthian leather? Do we need cell phones that let us levitate and beam holographs to distant planets? When is enough enough? And if the answer is never, then what good is more?

I can see important arguments for preserving the way of life we now have, so that as people move through the cycle of establishing themselves, accumulating wealth, having families and eventually downsizing as they age, they can capture their special moments with a 2-megapixel cell phone shot rather than daubing them on a cave wall in France with a sheep's foot dipped in gunk. But we have that now. So why does everyone think we must always have more?

Possibly because public authorities have burdened us with an array of social programs whose incentives are as perverse as their financing is unsound, so our only hope is to outgrow our own stupidity and they do not want to focus discussion on the matter and we don't want to either. I'm just saying.

Or maybe everyone is convinced that a free market economy must either expand or die. But I've never seen this case coherently argued and Adam Smith didn't believe it so it's a bit weird that even people who hate him now seem to.

When you get right down to it, how much turkey can a man eat?

[First published in the Ottawa Citizen]

Prime Minister Harper now says the $4 billion the Canadian and Ontario governments have offered GM and Chrysler is probably just the beginning of the ill-considered dumping of public money into companies with bleak long-term prospects. If you've been enjoying the scintillating level of debate on this proposal you'll also enjoy this video: In The Know: Should The Government Stop Dumping Money Into.............. A Giant Hole?

So George Bush has decided to go ahead and dump a preliminary $17.4 billion in public money into the two least successful "Big 3" North American auto makers. It's not obvious where that is in the Constitution but the President explained that "These are not ordinary circumstances." So apparently the idea is that something that would be unaffordable folly if you had money is indispensibly prudent conduct if you don't. I somehow missed that in economic class too.

As the global mental meltdown continues, the wisdom of decades has disappeared in weeks. We are left poorer for it. Take deficits... please. How long did it take us to learn, or say we'd learned, that they were bad? How many politicians swore while campaigning not to run them? And now look.

From the 1960s through the early 1980s, a lot of smart people really believed deficits stimulated the economy. But we ran them and things got worse, then we got rid of them and things got better. In some ways, I realize, governments of every stripe are now running deficits because they're helpless before the dynamics of a modern budget. But their insouciance leaves little doubt that the agonizing experiences of stagflation and runaway interest payments gave them only campaign slogans, not understanding.

What the rest of us learned over 30 years is that "government spending" does not stimulate the economy. When used for legitimate public purposes, like infrastructure or defence, it leaves us better off if done reasonably well. But whenever government spends, it spends real wealth that it must take from the private sector. That's you and me. In hard times, we're less able to bear any given burden. Hence increased government spending is especially bad in a slump.

Clearly politicians believe the opposite with instinctive rather than reasoned passion. Consider this brief story from Monday's Citizen: "U.S. stock index futures slipped, while the dollar and the yen rose yesterday, after world leaders pledged rapid action to combat the financial crisis, but fell short of announcing concrete measures or major regulatory breakthroughs."

In short, politicians announced yet again that they will definitely spend huge sums of money they don't have on things they don't want for reasons they can't specify in ways they haven't figured out. Oddly, confidence wasn't restored.

When they give details, things get worse. Last Tuesday, U.S. Treasury Secretary Henry M. Paulson Jr. announced that the $700 billion "rescue" plan approved by Congress would not, as originally declared, focus on buying bad mortgage debt, but would instead involve purchasing bank shares. But he didn't know if the government would also throw more billions at failing car companies on top of the $25 billion loan program they bagged in September. Or give money to other financial institutions as well. Or also buy bad mortgage debt after all. "Mr Paulson's comments", the BBC observed tartly, "did little to ease continuing investor jitters..." The next day, Mr. Paulson mused about $50 billion maybe going to companies that issue credit cards and make car and student loans. Or not.

As Terence Corcoran wrote in last Thursday's National Post, when governments are in full panic mode, determined to hurl very many billions of dollars in some direction but can't figure out which and keep changing their story, any sane person will get or stay out of the markets until they figure out where the harm, or good, is going to be done. But there's more.

In the 1980s and 1990s, it became a familiar critique of government industrial strategy that the state couldn't tell who the winners were and the market didn't need to be told. And the policy elite all learned to mouth the words that "picking winners and losers" was a bad idea. But evidently they never believed or understood it. All these bailout plans seem to involve giving money to companies governments have identified as key to economic vitality on the basis that they're about to go bust. So politicians are cluelessly unteachable here too. And they have our wallets.

The Globe and Mail recently editorialized that "While there are ample reasons for Ottawa to tell car makers they don't deserve taxpayer bailouts, there are also compelling reasons to provide help for weathering the current storm. The trick will be to provide the right help to keep these critical companies afloat without getting stuck in a corporate welfare quagmire." Strangely, this argument drops any pretence that GM, Ford and Chrysler are winners but urges backing them anyway, which is hard to portray as an intellectual advance on older ill-advised industrial strategies. Especially as no one has a word to say about why policies that were universally deplored as unaffordable folly in booms have become reputable wisdom in hard times. Instead this week's Throne Speech blithely promised "further support" for the "manufacturing sector, particularly the automotive and aerospace industries."

Maybe I should simply be happy no one's yet suggesting we rekindle inflation and see if it helps. But I'm not, because it's going to be a long, dumb winter. And just months ago we were all so smart.

[First published in the Ottawa Citizen]

Gas prices are down, and so am I. No, I'm not some sort of environmental nut. It's just that I know exactly what Susan Sontag meant when she said "I envy paranoids; they actually feel people are paying attention to them." And only last month I, as a consumer, was the victim of a vast international conspiracy. Those were the days. Back then I even had major politicians feeding my delusion. In September, Jack Layton called for a commissioner to review high gas prices; Stephen Harper told reporters it sure looked like gouging; and Stéphane Dion wanted more Competition Bureau powers to investigate price-fixing. Now prices are down, my political friends have gone silent and I'm a nobody.

Yeah, yeah, I've heard that gas prices both rise and fall in tandem because of the highly competitive nature of the industry, not the reverse, and are driven by actual or anticipated changes in the price of crude oil. But how lonely, how terribly lonely, to feel that it's all market forces, that I'm just a dust speck on the face of global trade. Of course politicians would rather be fearless crusaders against illicit plundering on an international scale than boring hacks mumbling populist clichés. And I'd rather be the target of such a conspiracy than just a guy struggling to make ends meet.

For the same reason -- to compensate for creeping feelings of insignificance, or insignificant feelings of creepiness -- I have frequently observed over many years that my investments invariably do what I wish my weight was doing and vice versa. Moreover, my mutual funds periodically jump up dramatically only to resume their steady painful day-by-day descent.

Just life in the market? Don't you believe it. Here's my theory: My holdings can't actually fall every day or they'd become worthless and the torment would stop. So once in a while the gnomes of Zurich engineer a sharp increase, over before I can enjoy it, then resume the long dreary decline. And while the "logical" explanation is that lots of people have the same problem, I don't open their financial statements. I'd rather sit alone brooding about a giant conspiracy pointed right at me. It makes me feel that I must really be somebody, when trillion-dollar international financial markets are rigged and jiggled daily just to make me feel bad. It sure beats sitting alone brooding that I'm sitting alone brooding.

So I'm not falling for any suggestion that I track the price fluctuations of my mutual funds to see if this fiendish pattern of occasional sharp rises and an overwhelming succession of small depressing declines even exists. No sir. They're not catching me with that one. I like feeling badly done to on a cosmic scale.

On the same basis I firmly refuse to track the long-term trend in gas prices adjusted for inflation. It risks revealing not only a fairly random pattern in the short to medium term, but also that gasoline is not more expensive now than in Henry Ford's day. Especially when you consider how much better it is. (Does anyone out there remember Johnny Cash's song about the guy whose filling station was put out of business by "high-test gasoline" that let cars whiz by on the freeway without constantly refuelling? If the name "Cisco Clifton" popped into your mind you may not be paranoid but you're certainly weird.) I say the tendency of prices to fall as well as rise just proves how clever they are.

Still, on a damp chilly October morning I can't shake the nagging suspicion that I am, at best, the victim of a third-rate failed conspiracy. Not for me fiendishness on the level of Ernst Stavro Blofeld or Fu Manchu or, to avoid the charge of making things up, the Masonic plot to take over the world and force us all to wear aprons or whatever it is they want.

It might be objected that the Masons have been so busy conspiring and hiding every single imaginable scrap of evidence except, um, that disquieting pyramid with the eye on the U.S. dollar that they've never really gotten around to doing all the sinister things their long-standing domination of everything permits. But I say that's a conspiracy where you get your money's worth: deep, patient, convoluted. The same way UFOs wouldn't be fun if the aliens crashed a spaceship on the West Block lawn in bright sunlight and a map and a medical manual fell out.

That's why I'm so disappointed with the gas price conspiracy. It turns out I'm the target of plotters on five continents and all I get is a lousy 90 cent per litre fill-up. What am I, chopped liver?

[First published in the Ottawa Citizen]

To get ready for Halloween our politicians are dressing as the ghosts of deficits past. I admit it's scary. But it's also in very bad taste. It's scary because spending money you ain't got is unwise in good times and catastrophic in bad and, as Adam Smith warned, accumulating public debt "has gradually enfeebled every state which has adopted it." And if Smith is too "right-wing" for you, how about that mad Jacobin Thomas Jefferson, who said "The principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale."

Such was the dusty wisdom of the ancients, blithely discarded in the 1960s and then painfully reacquired in the 1970s, 1980s and 1990s. Strange that it should so promptly go out the window in the 2000s. Frightening, too.

These costumes bring back queasy memories of tragicomic finance ministers in the late 1970s and 1980s assuring us the deficit was finally tamed, and proving it with lovely charts showing it shooting up for a couple more years then suddenly coming down as though we had elected fiscal Uri Gellers who could bend curves with their minds. Of course the end result was that interest on the debt started crowding out program spending and after the electorate pummelled governments that relied on the paranormal to restore order, we actually got quasi-cutters who, in good times, managed to sort things out within reason.

I say within reason because the Chrétien Liberals balanced the budget largely by cutting transfers to the provinces, which meant cutting other people's spending, not their own. Which is more than the Mulroney Tories ever did. But they never learned how to curtail the tendency of governments year after year to do less with more -- nor did the provinces, who responded by delaying vital spending on health care and infrastructure, thus swindling futurity in a different way rather than treating it with honest respect.

Given that in many ways we are already that futurity, the trick looks less impressive now than it once did. Hence the new Fraser Institute report saying that, having blown the locks back off the treasury door in the good times just ended, six provinces will spend more than half their revenue on health care by 2036. Underinvestment followed by panicky overspending isn't prudence and it isn't frugality. It certainly isn't leadership.

Our political masters have the rhetoric down pat for their disguises. Stephen Harper, whose Tories inherited annual spending of $210 billion and have already sent it past $240 billion in a budget titled "Responsible Leadership," just declared it "premature" to say whether he'll run a deficit. (Though it wasn't premature to say he wouldn't during the campaign.)

However, Mr. Harper gravely assured us, his government would definitely maintain "responsible fiscal policies." Exactly the right tone: Solemn guff about responsible policies was the invariable accompaniment of irresponsible ones in the past, and will be again.

Then there's Ontario's Dalton McGuinty, uniting with his fellow premiers in demanding that Ottawa maintain transfers even if it means a federal deficit but unlike them admitting that, even if he contributes to financial catastrophe at the federal level, he'll inflict it provincially as well.

"I've got 200,000 people who have lost their jobs, so now I'm going to shut down their hospitals? It just doesn't make any sense," was his excuse for possibly going into a deficit so he wouldn't have to make program cuts or raise taxes.

"I think Canadians are ahead of us," he blithered. "I think they understand these are very challenging economic times, they understand that our revenues are going to go down, that we have to make some difficult choices."

It's exactly the appropriate tone of brazen double-speak, because drifting into disaster to avoid changing his spending or revenue plans is neither difficult nor a choice. And it was delivered with such sanctimonious solemnity you'd think Don Mazankowski was back, wrapped in the tatters of his budgets, especially once you remember that Mr. McGuinty inherited spending of around $74 billion, and within four years had cranked it up to $96 billion with further large increases planned.

Hard choices? It is to laugh. (And in case you're thinking about Ralph Klein, his Tories doubled program spending between 1996/97 and 2005-06. Yes. Doubled.)

What's really scary is that politicians haven't forgotten the lessons of the past. They haven't forgotten how to cut spending; they never learned it. And they haven't forgotten that deficit spending is ruinous. They just don't care.

So yes, the costumes are scary. Now please take them off before we really say Boo. And then boo hoo.

[First published in the Ottawa Citizen]

After the stock market crash of 1929, progressive Republican president Herbert Hoover claimed his long-serving Treasury Secretary Andrew Mellon succinctly advised him to "liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate." He should have listened. Instead Hoover steered huge tax and tariff increases through Congress, flattening his own re-election hopes along with the economy and paving the way for his "pragmatic" successor Franklin Roosevelt to impose an endless bewildering series of ill-advised interventions accompanied by bitterly anti-capitalist rhetoric. It worked so well that 10 years after the crash the United States was still mired in a massive depression.

As Americans ponder whether this is a bad time to panic or the perfect opportunity, it's worth noting that after the earlier catastrophic slump of 1921, Mellon's advice was followed. Instead of kicking the economy when it was down, Republicans let markets sort themselves out, cut taxes, paid down debt and launched a long boom. Some may say the 1920s witnessed false prosperity under laissez-faire. But it's hard to deny that the 1930s witnessed real depression under intervention.

So forget partisan bickering over who's to blame for lack of government oversight of U.S. financial markets. The answer might surprise you, especially John McCain's new ad featuring Bill Clinton blaming the Democrats. But what's the point?

The problem wasn't too little regulation so there's not a lot to be gained by arguing about who wanted more. The root cause of this crisis is the U.S. government massively pumping up mortgage markets ever since the New Deal, piling program upon program to subsidize unsound lending, including Mr. Clinton's own administration putting aggressive political and even legal pressure on Fannie Mae and Freddie Mac to boost subprime markets.

What has now gone wrong is that huge numbers of people have suddenly realized that for decades banks were making loans they should not have approved to people taking out mortgages they could not afford because of guarantees the government should not have given. And no package should pass Congress that doesn't have some rational bearing on this problem.

The right answer is to get rid of those guarantees, not add to them. When you get a "meltdown," panic, recession, correction or whatever name makes you feel better about it, what has happened is not that the economic fundamentals have gotten out of whack but that large numbers of people have noticed they are out of whack. Proposals to "stabilize" financial markets under such circumstances amount to substituting make-believe for honest mistake. Why would you want to do that, and how could you? What you need is to get your financial system back in alignment with people's understanding of what the real assets are worth and the only way to do that is to let the prices of paper assets fall to realistic levels.

Please keep in mind that liquidating the unsound financial structure doesn't destroy real wealth. It doesn't mean going to houses purchased with triply unsound credit and burning them down. They will still be there and, odds are, the same people will still be living in them. Rich people aren't going to move into 10 cheap suburban houses each and put typical American workers into cardboard boxes. The best economic use of modest houses is to house folks of modest means and that's what a tidied-up financial system would do with them.

Panic, by contrast, means throwing good money after bad. All the Bush administration seems to have is the old something-must-be-done, this-is-something, so this-must-be-done argument. Other voices are no more persuasive. For instance a strangely cheery Globe and Mail piece from a British academic proclaimed not only that "the U.S. free-market creed has self-destructed" but that the "era of U.S. global leadership ... is over". Phooey. This bubble had nothing to do with free markets. And left-wing professors have been gloating over the decline of the American empire since at least 1970, when Richard Nixon took the United States off the gold standard amid the Vietnam entanglement, race riots, economic stagnation and a rising Soviet challenge. It's old news and it isn't true.

It also isn't relevant. No amount of government profligacy can make unsound subprime derivatives valuable in any geopolitical context. And Americans seem to know it. Hence the shameless loading of expensive unrelated goodies to the second, Senate, version of the bailout to seduce the surprising number of Congresspersons who heeded Mellon, and voters, the first time around.

Here's hoping they listen again.

[First published in the Ottawa Citizen]