Federal finance minister preaches debt reduction

Daniel MacEachern
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But major projects like Muskrat Falls necessary for long-term return, says Flaherty

Federal Finance Minister Jim Flaherty spoke to the St. John’s Board of Trade Tuesday. — Photo by Daniel MacEachern/The Telegram

The power knocked out by tropical storm Leslie came back on just three minutes before the start of federal Finance Minister Jim Flaherty’s luncheon with the St. John’s Board of Trade.

The dining room at the Sheraton Hotel had been equipped with emergency lighting that turned out not to be needed for Flaherty’s speech.

His speech outlined infrastructure spending in the province while touting the Conservative government’s response during the economic downturn of 2008-09 and describing the “fragility and uncertainty” in the Canadian economy, which he said is susceptible to crises in other world economies.

“The danger then, as we perceived it, of course, was the weakness in the United States economy, the American economy, and the fact they were accumulating so much public debt and running such large deficits,” he said. “That hasn’t changed much, but it has been overridden in the meantime by the weakness in the European banking system and some of the sovereign countries in Europe.”

The government, after its election win in 2006, decided to get back to balancing budgets and reducing debt, said Flaherty, to give it flexibility to respond to economic crises, such as the downturn in 2008.

The federal budget is not balanced, but Flaherty repeated the government’s province to eliminate the deficit in “the medium term” — 2016-17 as of the last federal budget.

Following his speech, Flaherty was asked how his call for balanced budgets and reduced debt jibes with the federal government’s endorsement via loan guarantee — which he said isn’t ready but progress is being made — of Newfoundland and Labrador’s Muskrat Falls project, which will add billions to the provincial debt.

“My concerns about debt and deficit relate primarily to governments that run chronic operating deficits, which is a problem,” he said.

“The major responsibility of the provinces — health care, education, social services — need to be controlled in terms of spending, so that provinces don’t build up large public debt.”

Having said that, said the finance minister, there are large projects like Muskrat Falls that are worth the investment because there’s a long-term return on taxpayer money, he said.

NDP MP Ryan Cleary, who attended Flaherty’s speech, was skeptical of how well the government handled infrastructure spending with its Economic Action Plan during the recession.

“There’s a report out today that is critical of infrastructure needs right across the country, basically saying that 21 per cent of roads are in poor condition, so the Economic Action Plan, in terms of how well that did? We both have our opinions on that, but I can tell you this: infrastructure in Newfoundland and Labrador, and across the country, is in need of a hell of a lot of work.”

Clearly also criticized Conservative government policies that he said are creating an imbalance in Atlantic Canada.

“One of the things is the changes to employment insurance, and the lopsided impact on rural areas of Atlantic Canada, in particular rural areas of Newfoundland and Labrador, my main concern,” he said. “We’ve got another policy change that’s still on the board, and that’s changes to owner-operator fleet-separation policies. If the Conservative government eliminates that, that’s going to change the whole rural economy of Atlantic Canada, and Newfoundland and Labrador.”


Twitter: TelegramDaniel

Organizations: Board of Trade.The, Sheraton Hotel

Geographic location: Muskrat Falls, Newfoundland and Labrador, United States Europe Atlantic Canada

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Recent comments

  • Cold Future
    September 14, 2012 - 12:01

    How stupid can it get-debt for Muskrat takes away money which can be well spent on the chronic debt producers such as health care-Flaherty knows that as well as anybody. But if the PC goverment of Newfoundland wants to give back to mainland Canada (subsidizing their electricity rates) which is exactly what Muskrat will do, the federal conservatives are all for it- its called giving it back to the ABC'ers and the ABC campaign. How often does a province voluntarily give back? After all, most provinces complain when their transfer payments are reduced. Why should we not be called stupid newfies when we do things like that-giving back.

  • Brad Cabana
    September 12, 2012 - 18:24

    The federal finance minister is spot on with his analysis of the US and European scenarios, but he is way off base with his failure to apply those same principles to Muskrat Falls and the NL gov. You can't have it both ways. The fact that it would supply mines with cheap power does not over ride the fact it will destroy the fiscal position of this province in the mid and distant future.Disappointing.

    • a business man
      September 14, 2012 - 08:32

      but Brad, what if one supports MF because they believe that destroying the fiscal position of newfoundland is in the best economic interests of Canada as a whole? I get that you are disappointed, but I as a taxpayer and voter support destroying the fiscal position of newfoundland if it benefits Canada (more specifically, if it benefits ME). How do you respond to that?

  • Fred
    September 12, 2012 - 09:00

    Seriously folks what does Cleary know about financing and governing ? We shouldn't take anything he says seriously except of course that he still feels the Seal Hunt should be shut down ! One term MP LOL.....

    • Robert
      September 12, 2012 - 15:52

      Took the words right out of my mouth Fred. Cleary loves a soapbox and attention, it's a shame he rarely has anything of substance to say when he's on one.