Friday, January 09, 2009

Deficit Spending

It appears the upcoming federal budget is going to have everything in it--infrastructure spending, bailouts, tax cuts, retraining programs, etc. to try and boost the economy. Will it help? A little, but it won't cure it.

The tax cuts won't have effect on the economy until a few years later as folks will likely pay off their own debt and save a little to put into the new Tax Free Savings Account, but I'll take what I can get.

To me, the most imporant part is the retraining aspect as job losses are increasing and people need to get into sectors that have better job stability. I think eventually, Canada has to move its manufacturing out and replace with more stable, long-term jobs and this is done through accessible education and training.

Anyway, I thought the budget was going to be a modest one, with a slight deficit, and with a spoiler to have the Liberals vote it down and likely force an election which Harper could win a majority. But it appears newly anointed (read: 'not party elected') Liberal Leader, Michael Ignatieff, will probably have his caucus support it, basically killing the coalition. Aw darn.

However, with regard to deficit spending rumoured up to 30 billion, I have this to say (which I've been saying for years)...

If there are direct income tax cuts in this budget, then I could care less what the deficit is. Canadians have their own bills to pay and have been cutting their own expenses, using credit cards, getting loans for decades to get by. I'm mostly talking about low to middle income folks here who are taxed to the gills.

And if the gov't wants to get out of deficit, they'll have no choice but to sell off useless 'assets' like empty buildings, cut waste and improve departmental efficiencies.

This is really too bad as it appears they'll be deficits for the next several years, completely negating the paying down of debt and freeing up money from debt interest payments, which still makes up the largest piece of the budgetary pie.

Unfortunately, because Canada's gov't is one of the biggest in the world per capita, even ever since we've been in the black for the past 12 years, they only got to pay about a third of the debt down, because they were still increasing spending, although their tax revenues shot up.

So I'm glad both Harper and Ignatieff agree on tax cuts. In fact, they seem to be agreeing on a lot of things, including deficit spending.

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