Speaking at a Chinese New Year festival near Toronto this weekend, Prime Minister Stephen Harper said he hopes that the Year of the Ox will also be the year of the return of the bull market. Our major banks would have to disagree with this statement. Both TD Bank and the Bank of Nova Scotia predict our economy will continue to shrink and will loses hundreds of thousands jobs (in addition to the hundreds of thousands already lost) by year end. US analysts predict the economy will not recover until 2010 at best.
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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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With the resumption of parliament only a few days away, most people are at the edge of their seats awaiting the new budget to be announced by Harper. To avoid a vote of confidence, we are expecting as much as a $30 Billion deficit, with spending on infrastructure, tax cuts, and employment insurance. Considering only a few months ago, Harper denied the allegations of Canada even being in a recession; this will be a major step towards fixing the economic hardships which we are all enduring. The idea is to put government spending towards the growth of the lower and middle classes to ensure consumer spending, thus kick-start the economy.

Thirty-billion dollars is a lot of money. What happens if this deficit occurs and no change is done to our economy? Worse, what happens if with this major spending and deficit, our country goes further into recession? Where is this money going to come from? Will Canada spiral further into debt? Could we face the ever growing fear of another depression?

While these questions linger on everyone’s mind, infrastructure plans need to be perfected, spending must occur, but at the same time futile transactions must stop; jobs need to be created. Money must be put into the hands of the consumers. Confidence in not only the economy, but also the corporations and companies that keep it running, must grow. How do we go about doing that? Economists from around the country are working around the clock to figure out plans to ensure the growth of our economy, but they are – in the end – trapped within a box of their own creation, unable to take a step away from it, to gain an outside perspective on things.
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Job Losses of 34,400 in December Make for a Grim Outlook in 2009

Statistics Canada announced on Friday that 34,400 jobs were lost in December, following November’s loss of 70,600 jobs. Prime Minister Stephen Harper called these numbers “troubling” but maintains that the situation in the US is a lot worse. Our neighbours down south lost over 1 million jobs in the same time period. Although, with a population that is 10 times our size, their loss of 1 million jobs has virtually the same impact on the unemployment rate. As the unemployment rate down south hit a 16 year high of 7.2%, our rate rose to 6.6% and does not look like it will decline anytime soon. With such interdependent economies, there is no doubt that the situation in the United States will have a negative impact on Canadians. 2008 was the worst year for job loss in the US since World War II and this makes 2009’s outlook even grimmer for Canadians as the crisis continues to make its way north, according to both Harper and Finance Minister Jim Flaherty.
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Prime Minister Stephen Harper had a far less dreary outlook on the state of the Canadian economy in a recent interview with Maclean’s magazine.

Harper believes that Canada is in a strong economic position compared with others and should be able to exit the recession relatively quickly.

Has Harper changed his tune for the benefit of the Canadian people? It’s obvious that this is a move of a political nature. Remember everyone, Parliament isn’t in session currently, and when it does come back, we may be heading back to the voting booths should the idea of a coalition government still be present. Yet, political observers believe that Harper will remain in power. As well, the Liberals have backed off from their attacks, and Harper himself has stated that he doesn’t want to go back to the polls.
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