Mr. Harper's budget opus

Lana
Lana Payne
Send to a friend

Send this article to a friend.

It will be the most important federal budget in more than a generation.

It will determine the fate of a government. But more importantly it will determine whether the Harper Conservatives got the message on the economy and are ready and willing to do what is necessary to strengthen the social safety net, save and create jobs and be there for Canadian families during the rough days ahead.

Right up until the end of November, the Conservatives were basking in their political gamesmanship with little concern for what was happening in communities throughout the country.

It will be the most important federal budget in more than a generation.

It will determine the fate of a government. But more importantly it will determine whether the Harper Conservatives got the message on the economy and are ready and willing to do what is necessary to strengthen the social safety net, save and create jobs and be there for Canadian families during the rough days ahead.

Right up until the end of November, the Conservatives were basking in their political gamesmanship with little concern for what was happening in communities throughout the country.

But their failure to take the global economic crisis seriously, their arrogance and insensitivity in the face of more than 70,000 job losses in Nov-ember came crashing down around them as the Opposition parties got their collective act together.

It was the scare of losing power that finally got Stephen Harper's att-ention. And yet the mounting economic evidence should have been enough.

It was not.

Canada's finance minister, Jim Flaherty, has made a total fool of himself ignoring what everyone was saying about the economy, until he, too, was forced into admitting that the economy needed attention.

And even now he doesn't seem to be getting the right message - talking up tax cuts as economic stimulus when most, including the business sector, are calling for more effective stimulus, such as substantial spending on infrastructure. Tax cuts aren't much good to the tens of thousands losing their jobs.

And the numbers continue to climb. In December another 70,000 full-time jobs were lost, bringing the country's unemployment rate to 6.6 per cent. Overall, there was a net loss of 34,000 jobs in December as the losses in full-time employment were slightly offset by an increase in part-time employment. For those counting, that's a loss of over 100,000 jobs in the last two months of 2008.

The big question is whether Flaherty and his boss are able to swallow their ideology and dogma long enough to do what the country and its citizens need.

We also need to be getting the best bang for our buck. We will see if we do on Jan. 27 when the federal budget is brought down.

An alternative budget

A week or so ago, the people responsible for the annual alternative federal budget released their economic stimulus plan. It includes additional spending of $33 billion in 2009-10 fiscal year, or about two per cent of gross domestic product (GDP), which is the recommended economic stimulus by international bodies such as the International Monetary Fund and the Organization for Economic Co-operation and Development.

The alternative budget group says its plan will create over 400,000 jobs in 2009-10 fiscal year, prevent plummeting purchasing power, provide income protection and skills training and invest in "shovel-ready" in-frastructure. It also calls for an investment in important public services like child care.

What the alternative federal budget plan also highlights is just how ineffective tax cuts are as an economic stimulus measure.

"It's not just the amount of economic stimulus that is important, but also how the money is spent," says the report, which explains what happens when governments spent $1 billion in different ways.

For example, a billion dollars in tax cuts would result in an increase in GDP of just $720 million and would create merely 7,000 jobs, whereas a billion dollars spent on infrastructure will create more than 16,000 jobs and increase the GDP by $1.78 billion. Investing in health-related services boosts GDP by the same amount as infrastructure and creates 18,000 jobs. In fact, boosting the incomes of the poor will have a better impact on the economy than tax cuts.

"Simply put, government spending provides more stimulus than tax cuts because it creates jobs. People who have jobs spend," notes the report.

People who have decent income re-placement when they lose their jobs also spend. They also make mortgage payments. As job losses mount, governments must ensure Canadian families are able to weather the economic storm.

This can be done by fixing the country's employment insurance system and investing in a jobs training program so workers who need new skills have an opportunity to get them. And governments should include additional adjustment measures like retirement programs for older workers in industries facing massive restructuring.

Tax cuts won't cut it

Canadians need real solutions to their real problems, and that means Flaherty has to throw away his tax-cut broken record.

The problems facing the economy will not be solved by tax cuts that, according to economist Armine Yalnizyan, will do little to ignite consumer confidence or create many jobs. She notes a study of U.S. tax rebates which found that only 20 per cent of the tax cuts ever got spent. The rest went to debt repayment, savings or to buy imports. The study, says Yalnizyan, found that a dollar in tax cuts led to just 10 cents in stimulus.

The economic slowdown is al-ready incredibly painful for many Canadians families, including many in this province, as the closures, downsizing and layoffs continue to grow. They are struggling to access employment insurance, to find work to replace the good-paying job they just lost at a mine, paper mill or out West.

The question now is whether the federal government is going to get the economic stimulus right or if the Harper Conservatives will inflict more pain by failing to do what is needed - a plan that protects Canadians when they lose their jobs and spends on projects that put people to work.

One thing is for certain, this economic crisis has highlighted just how eroded our social safety net has become. This might be just the stimulus our decision-makers need to fix it. For all our sakes, let's hope so.

Lana Payne is president of the Newfoundland and Labrador Federation of Labour. She can be reached by e-mail at lanapayne@nl.rogers.com. Her column returns Jan. 31.

Organizations: Harper Conservatives, International Monetary Fund, Organization for Economic Co Newfoundland and Labrador Federation of Labour

Geographic location: Nov, Canada, U.S.

  • 1
  • 2
  • 3
  • 4
  • 5

Thanks for voting!

Top of page

Comments

Comments

Recent comments

  • vipor
    July 02, 2010 - 13:19

    the good old usa will decide when this mess is over not priminster harper 80%of canadian product go directly to the usa i spent a few years off the island you should maybe you would see how business in this country works

  • Sally
    July 02, 2010 - 13:08

    Watching Mr Harper's scrum after the premiers' conference yeaterday it is clear he intends to give tax cuts to the middlle class as part of his budget. Since so many of the manufacturing jobs being lost are middle class Canadians I can't see how a tax cut will benefit them. If they aren't working they won't be paying taxes. He also tried to link this to Mr Ignatieff when he has make it clear he thinks any tax cuts should go to low income Canadians. They will spend any additional income they receive just to make ends meet. Mr Harper is still trying to buy votes with little regard for getting the best economical stimulus for every dollar spent.

  • vipor
    July 01, 2010 - 20:01

    the good old usa will decide when this mess is over not priminster harper 80%of canadian product go directly to the usa i spent a few years off the island you should maybe you would see how business in this country works

  • Sally
    July 01, 2010 - 19:43

    Watching Mr Harper's scrum after the premiers' conference yeaterday it is clear he intends to give tax cuts to the middlle class as part of his budget. Since so many of the manufacturing jobs being lost are middle class Canadians I can't see how a tax cut will benefit them. If they aren't working they won't be paying taxes. He also tried to link this to Mr Ignatieff when he has make it clear he thinks any tax cuts should go to low income Canadians. They will spend any additional income they receive just to make ends meet. Mr Harper is still trying to buy votes with little regard for getting the best economical stimulus for every dollar spent.