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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At a recent G7 meeting in Rome, finance ministers and central bank directors from the all seven nations agreed for the need to “take measures” in order to address and slowly reverse the current economic downturn, but also pledged to avoid protectionist policies within their countries.

Jim Flaherty in particular was critical of any shift toward protectionist policies, saying that it is “populist politics” to cater to short-term interests with policies that will discourage foreign ownership, tariffs, and quotas on imports as a method of stimulating economic activity domestically. Flaherty stressed that any policies that will interfere with the global free market would only lead to more severe consequences in the future, and explained that he made this point very clearly during the meetings in Italy.

For starters, Flaherty’s use of the word “populist” to describe protectionist policies is incredibly typical of Conservative party rhetoric. Dismissing anything that strays from their narrow ideology using extreme language is a favourite tactic of Harper and Co. We need only look at the proposed coalition government of late 2008 to see how intraparty letters instructed MPs and officials to refer to the NDP as
“socialists”.
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After the near-death experience for the Harper Conservatives in November, I expected Prime Minister Harper and Finance Minister Jim Flaherty to table a budget that would be responsive to growing concerns about the state of the Canadian economy.

And I admit, many of the budget leaks leading up to the official announcement made it seem like Harper was finally in touch with this reality – the proposed increased spending on infrastructure and programmes would provide jobs while tax cuts would spur consumer spending.

When the budget was finally tabled, it did address a number of these issues. And while I applaud the government for making much-needed (and highly uncharacteristic) investments in social spending, they really missed the ball on one key issue …

Employment Insurance (EI).
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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:
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Prime Minister Stephen Harper & Finance Minister Jim Flaherty

On Thursday, November 27th, the Conservatives are expected to announce a plan that would slash public funding for political parties beginning next year. Jim Flaherty, Canada’s Finance Minister, will make the announcement in his fiscal update – a proposal that is seen as a declaration of war to opposition parties.

Currently, all political parties receive a public subsidy of $1.75 per year for each vote they receive in the most recent general election. This subsidy has cost taxpayers approximately $28-million in the past year.
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