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Harper's flip flop on running a deficit
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| MarkT |
indeed, he wasn't alone in refusing to admit that a deficit would likely be necessary, but it's still an amusing flip-flop on his part.
http://www.thestar.com/comment/article/542712
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EDITORIAL
Nov 25, 2008
Having discovered his inner Keynes, Prime Minister Stephen Harper is now saying fiscal stimulus and deficit financing are "essential" to avert economic disaster. He even suggests that Canadians who cling to a belief in balanced budgets are guilty of "simplistic" thinking.
This would be the same Stephen Harper who declared as recently as Oct. 14 (election day) in a front page article in the Star: "We'll never go back into deficit."
Harper can't argue that circumstances have changed since Oct. 14. The financial meltdown was already well under way then, and most mainstream economists – like the legendary John Maynard Keynes in the 1930s – were saying that maintaining a balanced budget in the face of the economic headwinds was utterly wrongheaded.
If Canadians are thinking simplistically, then, it is because politicians like Harper refused to be straight with them during the recent election campaign.
The best that can be said for Harper is that he was not alone. All the opposition leaders also pledged during the campaign to keep the federal budget balanced, including even NDP Leader Jack ("I am not a Keynesian") Layton.
While we welcome Harper's post-election conversion to economic reality, it is not at all clear that his finance minister, Jim Flaherty, has gotten the message. Yesterday in Toronto, Flaherty continued to play down the need for stimulus in his upcoming economic statement. "The fact is we have a stimulus of almost 2 per cent of GDP (gross domestic product) already in the Canadian economy," he said. "Fortunately we acted in advance. A lot of countries have had to play catch-up on that stimulus."
This could be just a case of Flaherty following the tradition of finance ministers talking down their budgets in advance so as to diminish expectations. Or it could be that Flaherty's neo-conservative ideology is getting in the way of his judgment.
Fortunately, U.S. president-elect Barack Obama is unfettered by ideology and is already taking steps to stimulate the economy, eight weeks before his wearing-in. His Democratic allies in Congress are talking of a stimulus package, including tax cuts and increased spending, of up to $700 billion.
American stimulus would certainly help to pull Canada out of the recession. But our national government should be taking proportional steps. A good place to start would be the economic statement Flaherty is to unveil on Thursday. |
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| Orko |
After so many years of substantial surpluses, it feels terrible to see a deficit coming. But hey, the conservatives by mandate are supposed to run closer to the break even point, than other parties, which is what they were doing. Now that people are going to be paying less in taxes, and spending less, it only makes sense that our income statement would reflect that.
Our banks are doing just fine, but our US auto sector is tanking, which is no surprise. I would be pretty upset if there is yet another bail out for the big three here in Canada, as they have been shooting them selves in the foot for decades, while just sucking up government cash.
It is time to move Ontario to a information processing province. Continue to help grow resource industries in the provinces that can support them, and let Mexico produce America's cars. With one of the highest post secondary graduate rates in the Western world, Ontario should not be focusing on maintaining a manufacturing industry.
If there are financial stimulus packages, I would really prefer them to sit down with each province, and territory to see where their strengths lie, in order to shore them up for an economic rebound, rather than trying to save ailing and broken sectors. |
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| originalVIBE |
No one during election time predicted that the economy and Canadian dollar would fall this fast.
He is doing what is necessary to keep Canada a float. The other parties in this country would like to run an even larger deficit with more then double the spending...they also said they would be deficit free so this flip flop is completely understandable. |
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| exstasie |
| quote: | Originally posted by originalVIBE
No one during election time predicted that the economy and Canadian dollar would fall this fast.
He is doing what is necessary to keep Canada a float. The other parties in this country would like to run an even larger deficit with more then double the spending...they also said they would be deficit free so this flip flop is completely understandable. |
+1
It's economics 101 that running a deficit during a recession is the best thing to help stimuate the economy.
It is imperative that the government starts to spend some money to help get the economy moving. Sitting back and trying to cut expenses is the last thing we need.
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| smuncky |
| quote: | Originally posted by exstasie
It is imperative that the government starts to spend some money to help get the economy moving. |
ie. big infrastructure projects plz :) |
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| Jayx1 |
One thing harper wont do that everyone else would have is blame it on Mike Harris LOL!
Seriously though, this sucks but i understand a small deficit as long as it rebounds when the economy does. If we are still running deficits 5 years from now when the economy is doing fine (im looking at you dalton mcguinty) then we will have issues.
Hey, at least he didnt pull an HW Bush or a mcguinty by saying "no new taxes" and then raising them at first chance :). And i will give americans credit here, at least they voted HW bush out for lying. |
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| Jayx1 |
| quote: | Originally posted by smuncky
ie. big infrastructure projects plz :) |
Ask Bob Rae or Ontario's NDP how well that worked last time |
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| Orko |
| quote: | Originally posted by smuncky
ie. big infrastructure projects plz :) |
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| MarkT |
^^^ absolutely. many are calling on the U.S. gov't to do the same instead of bailing out private corporations with taxpayer money.
I'm certainly not saying that Canada should not run a deficit...as spending is indeed a primary theory of how to escape from a recession.
the defense of "no one saw this coming" is hardly an excuse for Harper and I don't think he's even making that excuse. If he were to use that as an excuse (and maybe he will do so simply to satisfy an ingnorant public?), it's rather easy to shoot that down, isn't it?
Harper made his "no deficit" comment on election day in mid-Oct.
oil prices peaked in mid-July and have declined ever since. As of election day, oil was at about HALF it's peak in July...so the freefall was in full swing.
How could this NOT affect Canada? The entire Alberta oilsands industry hinges on the price of oil being relatively high. soooooooooo...if oil prices were falling and if Ontario was already crying, wouldn't that have suggested that that the entire country could be facing tough times?
The "credit crisis" has been going on for some time now and anyone who has at any time, including now, predicted with confidence that we are close to being "in the clear" is who I'll call an idealist, at best (others might say 'idiot' is more accurate, lol).
I think it's safe to say that the CPC knew damn well that it would quite likely have to run a deficit (as did the other party leaders). I'm simply enjoying the usually smug Stephen Harper having to suck it up and essentially admit that what he said was a load of crap stated for the CPC's own political benefit. No one wants to hear you might run a deficit when everyone else says they'll have a balanced budget.
The issue isn't that a deficit is going to be run...it's that balancing the books in the first place is what resulted in the need to now run a deficit. Maintaining a surplus could have provided the necessary cushion, so that a deficit wasn't required, no? Again, I'll refer back to my criticism of the CPC's cutting the GST as a poor move, with that money being better spent elsewhere, particularly being able to evaluate each year where to spend it. Previously, debt repayment, infrastructure/cities, etc. Now, that money would be there to do whatever is deemed necessary (still, infrastructure would be good).
Really, this is all about enjoying Harper's foot in his mouth, despite the action being necessary. Just like not taxing income trusts, right? :D
anyway, another article I read that was interesting, particularly the end:
http://www.thestar.com/comment/article/541627
| quote: | Bust takes Alberta by surprise
Nov 23, 2008 04:30 AM
Gillian Steward
There's a tiny park in downtown Calgary that is a stark reminder of everything that went wrong in Alberta after the boom of the 1980s and seems to be happening all over again.
The park is right next to the Bank of Montreal's 41-storey office tower. It was supposed to be the site of a second tower that was cancelled when the bank realized the boom was over and it wouldn't need all those offices in Western Canada after all.
Twenty years later, the price of oil and gas has nosedived again and major projects are about to be cancelled or capped.
Just last week, developers of what is slated to be the tallest building in Western Canada declared that they need $1.1 billion to keep the project going. There is already a square-block hole in the ground and a forest of girders and cranes on-site in the heart of downtown Calgary, but the future home of EnCana Corporation is desperately trying to arrange construction financing in a tight credit market.
Building permits on five other large projects are set to expire because of inactivity. In some cases, the city has had to seal empty construction pits because the developers have pulled the plug.
You would think that in a city, and a province, that has experienced more than a few booms and busts over the past 80 years some sort of common sense would have evolved about how to thrive over the long term in such an economy.
But it seems both the private sector and the government are easily blinded by their wishful thinking: this boom will last forever and the money will keep rolling in, they keep telling themselves and everyone else.
But it never does. So in the same week that the city's largest construction project was revealed to be in trouble, the finance minister and the premier announced more bad news.
The provincial treasury's projected surplus for 2008-2009 dwindled from $8.5 billion to $2 billion because of declining oil and gas prices and will likely dwindle even further. Plans for new roads, schools and hospitals are now on hold.
Premier Ed Stelmach also revealed that he is deferring a new royalty regime – which was have to added more than $1.4 billion a year to provincial coffers – because it's simply the wrong time to increase taxes and risk a further slowdown of the petroleum industry.
No doubt he wishes former premier Ralph Klein had increased royalties years ago when the industry was awash in profits.
None of this would really matter if the provincial government had actually prepared for the bust during the boom by saving some of its billions of dollars in bounty.
But it didn't. Instead it spent billions on infrastructure when the cost of labour and materials was skyrocketing; at one point it issued $400 cheques to every man, woman and child in Alberta, a $1.4 billion giveaway; and it cut taxes or kept them low.
Alberta still has The Heritage Savings Trust Fund established by former premier Peter Lougheed but it is only worth $15.8 billion. Norway, by contrast, has managed to squirrel away $350 billion since 1991.
Stephen Harper's Conservatives have also managed to whittle away billion dollar surpluses. Perhaps they also thought the boom would last forever. Or perhaps all those Alberta Conservatives simply forgot about the famous bumper sticker from the 1980s that read: "Please God, let there be another oil boom. I promise not to piss it away this time."
Gillian Steward is a Calgary writer and journalist, and former managing editor of the Calgary Herald. Her column appears every other week. |
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| funkapotamus |
| quote: | Originally posted by Orko
After so many years of substantial surpluses, it feels terrible to see a deficit coming. But hey, the conservatives by mandate are supposed to run closer to the break even point, than other parties, which is what they were doing. Now that people are going to be paying less in taxes, and spending less, it only makes sense that our income statement would reflect that.
Our banks are doing just fine, but our US auto sector is tanking, which is no surprise. I would be pretty upset if there is yet another bail out for the big three here in Canada, as they have been shooting them selves in the foot for decades, while just sucking up government cash.
It is time to move Ontario to a information processing province. Continue to help grow resource industries in the provinces that can support them, and let Mexico produce America's cars. With one of the highest post secondary graduate rates in the Western world, Ontario should not be focusing on maintaining a manufacturing industry.
If there are financial stimulus packages, I would really prefer them to sit down with each province, and territory to see where their strengths lie, in order to shore them up for an economic rebound, rather than trying to save ailing and broken sectors. |
IMO, If the automotive manufacturing sector is to survive in North America (Canada/US) it will require a complete overhaul. For one, give the north American consumer a fuel efficient, quality vehicle which doesn't fall to pieces before the warranties up. Second, It would also be nice if the UAW/CAW would play fair and grant the manufacturers the ability to innovate their entire production process. Why should a vehicle be shipped between cnd/us 5-7 times before its fully assembled?
Take this Ford Assembly plant in Brazil for example which manufactures 5 different vehicles, on the same production line. Perhaps a reorg under chapter 11 would give the manufactures the leverage needed to negotiate a better contract with the UAW/CAW to make something like this happen. Otherwise I can't see the 3 na auto makers operating in Na in the near future.
Fords most advanced assembly plant |
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| Orko |
Are the opposition parties for real? They just lost an election, and they are beating the drums again over the new proposed budgets.
, each one of them needs a swift kick to the head. |
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| activate |
| Harper never should have cut any taxes. |
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