Friday, December 05, 2008

Commentary - Deficit Brinkmanship

The decision by Governor General Michaëlle Jean to suspend the House of Commons until January 26th may be the smartest decision to come out of Ottawa since the Senators picked up Dany Heatley.

An Ipsos-Reid poll suggests 7 in 10 Canadians support the Governor General’s decision to give our 308 lawmakers a collective “time-out.” This extended Christmas break will hopefully allow our parliamentarians to cool down the rhetoric, give their heads a shake, and come back in the new year ready to work. Importantly, the country needs to design a fiscal direction through precarious times.

If we are to take the proposed coalition partners at their word, their willingness to defeat the government was precisely because of the government’s inability to map-out this fiscal direction. In a nutshell: their view was that the current government was not running fast enough or far enough into a deficit position in the name of bolstering the economy through increased government spending.

They proposed a $30-billion “stimulus package” that includes more funding for infrastructure, bailouts for the automobile, forestry and manufacturing industries, more money for the arts, more money for regional corporate welfare programs, a new childcare program, and other goodies longer than Santa’s wish list.

Considering the razor-thin surplus outlined in the Economic and Fiscal Update, their “stimulus package” would put Canada into what TD Bank economist, Don Drummond, suggests would be a structural, prolonged deficit.

Yet, what strangely has not been asked, is from where does this near-crazed urgency for massive deficit spending come?

Does it come from promises made during the recent election? Hardly. All three national parties campaigned on balancing the budget. Stéphane Dion told CTV News on September 22nd, a “Liberal government will never put Canada into deficit. Period.”

How about an outpouring of public demand for huge deficits? An Ipsos-Reid poll taken at the height of the “world financial calamity” in October revealed 82 percent of Canadians support the federal government cutting spending to keep the budget balanced. 57 percent of Canadians oppose running deficits and 83 percent oppose raising taxes.

Maybe the urgency for massive deficits comes from policy successes in other nations? Multi-trillion dollar “stimulus packages” and interventions by governments in the United States and elsewhere have, if anything, worsened economic conditions by creating more – not less – uncertainty in markets.

The unparalleled debts piled up as a result of these policies are very real. As one Canadian lawmaker put it: “I believe in balanced budgets … I don’t like paying interest to banks and investors when you could be putting money to better use.” Who said that? Jack Layton on September 30th.

To follow media reports one would think the Canadian government was utterly rudderless when it comes to economic management. This is not true. The Economic and Fiscal Update contained direction on taxes, cost containment (including civil service salaries), more infrastructure spending, asset sales, improved management, and the like.

Projections in the recent Economic and Fiscal Update suggest that Canada is going to see small negative growth in the real GDP for the next four months, and then recover and see positive growth through the end of 2009. In comparison to the United States, Canada’s recession will be much shorter with smaller negative growth, and larger positive growth following.

Unemployment is also projected to increase next year by less than one point to 7 percent, still significantly lower than the double-digit unemployment rates seen in through most of the 80s and early-90s.

Canada faces economic challenges but our situation is – thankfully – not as bad or severe as it is in the United States and other parts of the world. We need not – and should not – overreact with reckless policies or politics.

The Economic and Fiscal Update is not a budget, but appropriately addresses fiscal issues consistent with what many leaders of all the parties were saying during the recent election. To be sure, there will be disagreements, but it’s not impossible that lawmakers could try and build a consensus either. The Governor General was correct in allowing the government to at least present a budget before allowing a confidence vote.

What lawmakers might consider between now and then is the most recent polling indicating 72 percent of Canadians suggest they’re “truly scared” for the future of this country because of what is going on in Ottawa. Tough to blame them.

Scott Hennig & Troy Lanigan
Alberta Director National Communications Director


Luke said...

An Ipsos-Reid poll suggests 7 in 10 Canadians support the Governor General’s decision to give our 308 lawmakers a collective “time-out.”

If a poll was taken and the results showed, the majority of Canadians want Mr. Harper to resign then according to your logic he should?

All three national parties campaigned on balancing the budget. Stéphane Dion told CTV News on September 22nd, a “Liberal government will never put Canada into deficit. Period.”

If all three parties campaigned on balancing the budget then that would include Stephen Harper.

“Thursday, November 20, 2008
OTTAWA - Parliamentary budget officer Kevin Page told MPs Thursday that Canada's deficit next year could be as high as $13 billion and that Conservative government decisions to cut the GST and raise government spending are to blame, not global economic events."The weak fiscal performance to date is largely attributable to previous policy decisions as opposed to weakened economic conditions," Page wrote in his first report to parliamentarians on the government's economic and fiscal position.”
I tend to believe an impartial report. I know your federation won’t. Please do your job.
If the deficit next year goes to $13 billion how will the Conservatives balance the budget.
I ask that question because during the leader’s debate Mr. Harper said he would not raise taxes. And during the leader’s debate he was aware of the financial crisis.

On a related topic if your mandate is fighting for taxpayers. Where is your criticism for the Conservatives using taxpayer’s funds to campaign against this coalition?
Yes, we have been told by the PM that the funds will come out of the Conservative war chest. However if you stop and think and look at the situation as I do. Joe Blow donates $120 to the Conservatives; the Conservatives use all of the $120 to finance a TV ad. Joe Blow receives; I believe $90 back from the government as an income tax credit. That $90 came from tax payers.

For the past couple of years the Conservatives have been using tax payer funds (see above) to promote a smear campaign against Mr. Dion. They ran the campaign before an election was even called. If your organization is non-bias where is the out cry from you to stand up for all Cdn taxpayer?

Perhaps you may know if there is any limit a political party can spend outside of an election? If there isn’t then there should be, because the whole issue IMO would have a greater drain on the government’s finances. I believe the financial funding for political parties, based on votes garnered is a more fair and honest way to run a democracy. Some people who can't afford to make donations will not get their voices heard.

Wardster said...

You don't have a leg to stand on in your arguments Luke so its hardly worth pointing out why to a narrow-minded socialist like you; truth hurts doesn't it.

Luke said...

Wardster I see you can't debate just name calling. How conservative.
We Harper raise taxes?

Wardster said...

No need to debate LoL Your own logic says it all Pffft

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