The headline above this article might seem a bit harsh. But that's exactly what Prime Minister Stephen Harper is doing with his determination to keep a balanced budget in an election year.
The Canadian economy is clearly on the skids. The Bank of Canada has forecast that the gross domestic product will shrink in the first two quarters of this year. It shouldn't come as a surprise, given the collapse in most commodity prices.
Normally when the economy contracts, governments loosen up their fiscal policy to stimulate the purchase of goods and services. This is how western industrialized countries clawed out of a brutal meltdown in 2008.
But this time, Harper insists on keeping the budget balanced because it's an election year. He knows that his supporters are too stupid to realize that running a government is not like running a household—cutting back on public-sector spending in hard times merely exacerbates the pain.
So because Harper and his finance minister, Joe Oliver, want to crow about a balanced budget on the campaign trail, the governor of the Bank of Canada has had to take action.
Today, Stephen Poloz cut the overnight rate to a record low of 0.5 percent to try to bring about lower borrowing rates. The hope is that cheap and easy money will cause Canadians (rather than the government) to spend more, lifting us out of a recession.
Once the central bank reduced the overnight rate, the Canadian dollar went into a freefall. The world realized that the export-oriented governor wasn't going to go to the ramparts to protect the loonie. It ended the day at US$0.7740. That was off $0.0109 from the previous day's closing exchange rate.
The result will be higher food prices for Canadians if the dollar doesn't recover.
Had Harper run up a deficit, it would have forced the Canadian government to borrow money. This would have put upward pressure on interest rates. This, in turn, could have kept the Canadian dollar at a higher value vis-a-vis the American greenback.
But Harper is a dogmatic believer in the ideas of free-market zealots Milton Friedman and Friedrich Hayek. So our prime minister would have none of that, especially in an election year. Harper is going to keep a balanced budget even if it busts the life out of the economy.
The end result is that Canadians will end up paying the price for his anti-deficit zealotry at the supermarket checkout counter. Let's hope they realize that on election day.