Finance Minister Jim Flaherty Presents Government Budget

Today, the federal government revealed its highly anticipated budget and stimulus plan for pulling our sagging economy out of recession. To sum up in one sentence, the Tories are going to spend tens of billions of dollars to try and pump money into the economy, and Canada will have to weather large deficits along the way. Whatever it takes to keep our economy moving was the message from Finance Minister Jim Flaherty.

A deficit of $33.7 billion for the 2009-10 fiscal year and $29.8 billion the following year is predicted. For 2011-12, the red ink would diminish to $13 billion, followed by a deficit of $7.3 billion for 2012-13. Keeping the Conservatives’ track record regarding their forecasts of budget deficits/surpluses in mind, it seems like these numbers could turn out to be much, much larger. Just months ago, Harper was predicting small surpluses for the coming years, then altered his forecast to small deficits, and now massive ones. That leads me to believe these deficits could turn out to be much larger that we think. If the economy worsens beyond what is expected, this would certainly be true. “If they get worse, we will do more,” said Flaherty, speaking about economic conditions in Canada.

The budget dealt with many different aspects of the economy and Canada, but here is an overview of the major categories:

Infrastructure

As stated during the most recent Throne Speech, infrastructure spending was to be heavily relied upon to create jobs and pump money into the economy. Following on that promise, the Harper government is setting aside $4 billion on infrastructure projects for the next 2 years as well as cover up to 50 per cent of eligible project costs for provincial and municipal infrastructure costs.

Tax Cuts

For individual taxpayers, the government promises to boost the basic personal amount, allowing people to earn more before they have to pay federal tax. The basic amount would go from $9,600 to $10,320. The government also plans to raise the upper limits on the two lowest income tax brackets. The upper limit for the 15 percent bracket would go to $40,726, while the upper income limit for the 22 per cent bracket would rise to $81,452. These tax changes would cost the government approximately $1.9 billion for the 2009-10 fiscal year, and nearly $2 billion the following year.

Housing

A new home renovation tax credit would give up to $1,350 in tax relief on home improvement projects up to February 1st, 2010. The temporary credit would cost the government an estimated $2.5 billion for the upcoming fiscal year.

Unemployment Insurance

With job losses expected to rise as the economy continues to worsen, the government will be making changes to the Employment Insurance program. The government plans to extend maximum EI benefits by five weeks, bringing it up to a maximum of 50 weeks. The measure would be in effect for the next two years, at a cost of $1.15 billion. Another $500 million over two years is set aside to extend EI benefits for Canadians participating in longer-term training programs. The government is also setting aside $50-million over the next 2 years to cover severance pay owed to employees of bankrupt companies.

Today is a day that can most certainly go down in Canadian politics history in a big way. The NDP has already stated they will be opposing the budget (in fact they stated they would oppose it no matter what about a month ago), and so too have the Bloc Quebecois. That means the Conservative government will be defeated if Michael Ignatieff and the Liberals vote against it. But I would bet that’s not going to happen. Ignatieff was generally positive in his reaction to the budget, and the Liberal’s aren’t in a position to go to an election at this time. A recently conducted poll has shown that support for the Liberals has fallen in recent months, and if an election were to be held at that time, the Conservatives would win a majority government. It’s going to take a lot of rebuilding for the Liberal’s until they will be ready for another election.

We’ll find out tomorrow when Ignatieff and the Liberal Party make their official decision.

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Tags: Budget, coalition, Economy, harper, jim flaherty, recession, stimulus plan

This entry was posted on Tuesday, January 27th, 2009 at 9:13 pm and is filed under Economy, Federal Government. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.