Finance Minister Jim Flaherty
Photo Credit: CBC

Let’s get straight to the point. The deficit is an economic problem, but it is not as serious as many make it out to be. What may surprise many people is the fact that many business leaders and almost all neo-conservative politicians secretly agree. Don’t be fooled by Finance Minister Jim Flaherty’s recent rumblings about the deficit. His main concern is tax cuts and smaller government, not the deficit. In fact, a large deficit plays right into his plans for smaller government.

Let’s rewind our discussion back to the events in Ontario during the early 1990s when there was a severe recession and Mike Harris, who worked closely with Flaherty, was not quite yet Premier. Ontario was actually deficit-free for several years just before the recession of 1990. Recessions usually cause deficits, because the unemployment levels significantly reduce government revenue and because of the large costs of helping the unemployed. Based on the ideas of Keynesian macroeconomics, some governments try to end recessions by simulating growth through spending, further increasing the deficit. Ontario Premier Bob Rae, the leader of a socialist NDP government, tried this and so have most governments, including Mr. Harper’s, during this most recent global recession. Bob Rae eventually stopped spending and started reducing the deficit when he started receiving a lot of flak for the increased deficit. When Neo-conservative Mike Harris came to office, the deficit was already significantly way down. Mr. Harris and Mr. Flaherty continued the policy of deficit reduction, but not at a rate faster than Rae and that of other Canadian governments. The economy improved, not because of Harris tax cuts or deficit reduction, but because of low U.S. interest rates that created a large market for Ontario exports.
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Photo Credit: CBC

Desperate times call for desperate measures. Première Dalton Mcguinty seems to feel that during this recession- the biggest global economic recession in 80 years – it is necessary to review Canadian assets and look at the possibility of selling off certain properties such as Hydro One, the OLG and Racetracks, and the Liquor Control Board. Two banks, CIBC World Markets and Goldman Sachs Group, are reviewing these assets in addition to others, to determine whether selling these off would indeed be beneficial in slimming down the $24.7 billion deficit which Tory MPP Peter Shurman explains was of the Premiers own making. A final decision has yet to be made but the proposal is on the table.

Critics point out that the government would be able to book revenue only to the extent that the sale price exceeds the book value of the asset, making this option less attractive when viewed in the proper context. NDP leader Andrea Horwath said: “It’s quick cash but you wind up paying through the nose everyday. This government is reaching into the past for a tired old idea that doesn’t work.” She explained that selling off public assets is a disastrous idea that will cost Ontario in the long run. “It’s very clear that when these public assets are sold off, the public gets a bad deal,” she said. Ironically, it was just the other week when Finance Minister Dwight Duncan stood up in the Legislature and reamed the PCs for having sold off Highway 407 to a private company that can now raise its toll rates at will.
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Harper is the Cause of the Forecasted Budget Deficit

Liberal Leader Michael Ignatieff lashed out at Harper for the upcoming deficit that is expected as a result of the new budget. Speaking to fellow caucus members this morning, Ignatieff lashed out at Prime Minister Stephen Harper stating that “this deficit is squarely Mr. Harper’s responsibility. He spent us down to the red line in the good times and so we face the hard times as citizens of a great country with the cupboard bare.”

After the Liberals’ decade of surplus budgets, it seems Ignatieff is very angry that Harper and his Conservative government have led us into a recession with nothing to spare. Does the infamous coalition live on?
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