Will a new government fix the Canadian economy?

If CBC News is correct, then the deal that the Canadian opposition parties were working on has been reached. And if you ask me it's hard to find a more stupid reason - where's the evidence that the U.S. bailout has worked in any way, shape or form?

To give you an idea of the scare of the U.S. bailouts so far, someone someone has charted it (in inflation-adjusted dollars) against other major historical spending projects.

An article in today's LA Times seems worth reading. It notes:

Indeed, analysts warn that the nation's next financial crisis could come from the staggering cost of battling the current one.

...

Much of the Depression-World War II spending was on industrial production -- building new factories and converting existing plants to produce tanks, planes and ships. Huge sums also went into developing new technologies.

Those investments, combined with pent-up consumer demand and savings from the lean war years, quickly led to budget surpluses and sharp economic growth in the late 1940s as the baby boom began.

Analysts warn not to expect that to happen again. This time the government spending is largely ethereal, with the Federal Reserve printing more money to inject liquidity into the financial system and keep banks and other institutions afloat. And savings rates are low.

"Too many Americans have overextended themselves with regard to credit and debt, and too many have been following the bad example of the government," Walker said. "It is imperative that we recognize that this country has been living beyond its means and that we face large and growing structural deficits even after we turn the economy around."

If you translate "government spending is largely ethereal" into English, that means something along the lines "expect inflation" or "things will cost more".

Then there are economists at UCLA suggesting the "New Deal" spending programs actually significantly prolonged the Great Depression in the United States.