The Conservative Budget is released.
Today Prime Minister Harper’s budget has been released. If this budget does not satisfy the Liberal opposition, they will move to form a coalition and demand a new election to defeat the Conservative government. What the Liberals want is no surprise–more spending, big deficit. Often I wonder if the U.S. Democrats take their cue from the Canadian Liberals of visa versa. I want to be one of the first that predict that the Liberals and the NDP will do everything they can to cause the budget vote to fail.
Harper faced a glaring dilemma.
Last December, Harper faced the likely move by opposition to attempt to topple his regime by causing an election following no confidence votes in Parliament. The no confidence votes were an imminent threat by the opposition because Harper had not moved on an acceptable stimulus package for the economy.
- A Liberal-NDP coalition, backed by the Bloc Quebecois, was prepared to defeat the Harper government before Christmas after Flaherty (Minister of Finance) delivered an economic update that proposed slashing government spending, selling off assets – and no economic stimulus.1
Despite the fact there were many conservatives that did not want Harper to succumb to the pressure, he did anyway. Harper persuaded the Governor General to suspend Parliament to buy some time to formulate a “new budget.” Now that the new budget is being released today, it will be voted on immediately. The obvious question is this: Will there be enough spending in the budget to convince the opposition that they can not defeat the budget? I believe that the opposition will oppose the budget regardless of its content. After all, aren’t all proposed budgets in Canada but a political document–more or less an op-ed in this case. Harper already knows that regardless of the content of the budget, it will always face opposition. For example, David MacDonald, analyst at the Canadian Centre for Policy Alternatives opines that:
- If the federal government is serious about buffering Canadians against the worst of this recession, it shouldn’t be looking toward tax cuts. It should abandon those ideological precepts.2
I can hardly believe what I just quoted. Here is analyst working for a institution seeking policy alternatives advocating that the Conservative Party should abandon its ideology of tax cuts! Need I say more. Prime Minister Harper, you definitely will not please everyone. There are those in opposition who believe that only through massive government spending will the country survive an economic recession.
Tax Cuts!
It is reported that the budget will contain $2 billion per year “across the board” in income tax cuts–Obama, pay attention! Canadian government does not normally operate in a deficit unlike it neighbors to the south. Its been 11 years since the federal budget included deficient spending.3
However, because Harper faced intense pressure to provide stimulus spending thus creating a deficit, the Harper budget includes $30 billion in deficits this year and more the following year. According to CTV.TV, the budget includes the following:
- The surprise move of the day was the roughly $2 billion per year in income tax cuts. Those cuts will extend to $20 billion over the next six years.
The tax changes will include a slight increase in the basic personal exemption and raising the upper limit on the two lowest personal income-tax brackets.
Business tax cuts were also included in the budget, $2 billion over six years.
Government spending will jump dramatically in the budget — up 11 per cent in the 2009-2010 and three per cent in the year following.
EI benefits will also be extended five weeks for the next two years.
Other measures in the budget include:
* $12 billion for infrastructure spending towards roads, sewers and universities, $1 billion for “green” infrastructure, and $1 billion for clean-energy research.
* $1.5 billion for job training
* $7.8 billion for social housing and home renovation, including a one-year only Home Renovation Tax Credit of up to $1,350 per household.
* $2.7 billion in short-term loans to the auto industry.
* More than $1.4 billion for aboriginal schools, health, water, housing, community services and training.
As far as stimulus packages go, Harper’s budget is as good as one should expect. I look at it and see some good stuff. There will likely be lots of shovels going into the ground for building projects and that translates directly into jobs or less unemployment. I also am pleased to see that the federal government is not going to purchase banks, investment firms, insurance companies, or otherwise get into the private business sector.
I am disappointed to see the $2.7 million in loans being given to the auto industry but everyone knows why that provision was included. The Ontario economy relies heavily on the auto industry and there is plenty of opposition to Harper in Ontario.4
The real story to write about will be developing over the next few days as we wait and see what the NDP, Liberals, and Bloc Quebecois do to either support the budget or again succumb to their instincts and wage war against Harper just because that’s what they do.
- See, http://www.google.com/hostednews/canadianpress/article/ALeqM5j9gXwkXC4Xc6x1_XV_1YuUfxHpUA
- See, http://uk.reuters.com/article/marketsNewsUS/idUKN2346793820090123
- Although, prior administrations used surplus unemployment funds to show a balanced budget.
- See, http://ogov.newswire.ca/ontario/GPOE/2008/02/01/c6284.html?lmatch=〈=_e.html
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Hello. I am enjoying reading this new “netpaper” you are producing.
My question though, is this : Have the major causes of this economic melt down been exposed, and are the measures being taken (bailouts and loans) in any way being directed to stop a further melt down now “or” in the future?
So far the most touted explanation (coming from the Banks and Government) is that the common citizen borrowed too much money and then in a fit of irresponsibility, lost his job and defaulted on his bills.
My feelings is that it is greed from the top down has gotten out of control, and the Corporations are tearing down the walls of the city to get the gold held within.
Hi Don. Thanks for posting a comment. There has been so much written about the melt-down that I felt it would not be a ripe topic for me. The economic slowdown in Canada is most likely a domino effect of the U.S. economy. In the U.S. the politicians of course blame the average citizen, or bank. It is the art of projecting blame on others. The major contributor to this debacle is Congress and the Federal Reserve, and the Executive Branch. Congress’ biggest mistake was Fanny Mae and Freddy Mac which is of course a whole story of its own. Moreover, Congress miserably failed in its oversight responsibilities. The Federal Reserve forced lower interest with an abundant supply of money. The Executive branch failed miserably in its oversight i.e., the SEC. Government is the problem and government will not solve the problem. Capitalism will solve the problem if government will only get out of the way. As far as the “reasons” for the Canadian slow down, there may not be enough written about how this has happened, what caused it, etc. Maybe I will look into that as a topic very soon. Look forward to chatting with you more.
Do you feel that “totally free” Enterprise, or call it Capitalism, can solve the problem, or is it the “totally free” part that is causing the problem?
I had watched several TV programs over the last three years or so, and read several reports from people who were forecasting “this” melt down three years ago, because the big players in the economy were scraping too much money off the top of the economy, and leaving nothing left for the economy to run on. EXON was named several times as an example. They said the oil companies, and others were taking such high profits out of the pockets of the citizens that there was nothing left to live on. The balance of wealth was going out of skew, and all the money floating to the top, till the bubble burst.
To me, totally free enterprise is probably subject to different meanings. My thinking is that the phrase means, entrepreneurial economic activity. My thinking is that a combination of free enterprise (new entrepreneurial effort) and basic capitalism will solve the problems. I agree with what you said about corporations skimming massive amounts of money off the top, but that did not cause the meltdown. In any event, even if it did, free market forces will correct the situation. Take your example and break it down. Shareholders have the right to know what is going on in a corporation which they own stock in. If they have allowed corporate executives or directors to rob them, then they have suffered because of their own stupidity or because of their failure to be good stewards of their investments. I’m not talking about the illegal activity that shareholders could not have foreseen or stopped but I am talking about corporate executives and directors making big big money. They only make that kind of money at the pleasure and will of the shareholders. The problem is simply this. People gripe, bitch, and complain about anything and everything but take no action nor responsibility over their own property, investments or domains. If a company suffers because of the massive funds paid out for salaries, bonuses, parachutes, severance pay, etc. etc., then so be it. Government can not run a business nor can government manage business profits or executive salaries. Although, I am conservative, I will be the first to admit that Harper caved in. For example, he should of held his ground and refused to provide deficit spending in order to bailout the auto industry. Because he did not have the fortitude to do so, we are offering billions of dollars to companies that have been mismanaged. The companies contractually agreed to high wages and benefits to the labor unions and paid their executives too much money in light of the fact that other companies were taking market share from them. What changes do Canadians think Gm, Ford, and Chrysler will make to maintain profitability after the bailout funds are given to them. I have advocated all along that without the companies renegotiating their labor contracts they would not survive. Honda, Toyota, Nissan, Hyundai and others will eat them alive. Anyway, your questions generate more discussion than i can put in a reply but they sure do generate more topical ideas for my blog. Thank you. What else you got?
Hi Roland. I do not agree that companies of any size should be given “free” rein in how they function. If that ere feasible we would not need speed limits on the highways nor laws against other crimes. The fact is that it is an allowed human nature (to far too many) to maximize any position they have at any expense to others. In my area we have a group of pulp mills owned by a New York investment firm. They have refused in writing to pay their property Taxes this year. They are demanding (not requesting) about a 50% reduction this year. Their assessed Taxes come to something like 0.35% of their income. At the same time they have given permanent lay offs to about 50% of the work force.
They are exceeding the limits on toxic emissions on a daily basis and claiming they are “leaks”. The Pulp Mill operation over the years has totally killed the large farm next door. They will not accept 1 cents worth of responsibility. The Government and the Ministries will do nothing because the men responsible to act have got shares in the Corporation and don’t want to lose personal money. One newly retired MLA now sits on the board of directors of that Pulp Mill owner.
In another case the Minister of Forests brokered a windfall deal to a logging company, who had hired the Ministers younger brother to negotiate for them.
Thanks to the “profit taking” of an international Insurance company which bought up the largest logging company in the Island, we have gone from a logging and milling force of about 8000 to about 150 loggers, and no saw mills. And this was before the melt down.
My view of what caused the melt down is that the Banks and Wall street were “manufacturing” phoney profits with insider trading and “phoney deals”, while the Corporations were skimming off the top while breaking up all the smaller companies they could grab for the profits rendered from them.
Eventually there was no money left the little guy (who “is” the economy) and no jobs for him to earn any money either. So guess what? A Crash.
If the government wanted to help with bail outs, they should have backed the little guy and paid his mortgage until he could find another job. Let him have some place to live while he is looking.
That way the Finance company would have it’s cash flow and the home owner his life saved.
Don.
Thanks again Don for your insightful comments. I will have more to say later. In the meantime, I also have received the email that Shelley forwarded to me. I would like to talk about that as well very soon.
I have been waiting to hear your reply???
Don
Hi Don. Wow, you give me much to say but I will try to keep it brief. You’re way off the mark here. Maximizing profits is the tenet of capitalism. “At the expense” of others is where the profits come from. However, with that said, I have a three words for you with repect to U.S. companies being given a totally free reign and totally dominating a market that causes serious harm. Sherman Antitrust Act. We can not punish capitalism because our government officials fail in performing their duties. Malfeasance is everywhere and will continue until people finally get fed up. Hence the Boston Tea Party, hence elections, etc. In your comment you articulate and descbribe illegal behavior as being he cause of woes of the little guy and your local industry. Again, the source of the woes is not the free market; its the illegal conduct of entities or individuals and not being held accountable for it.
As far as bailout policy–I agree with you. If there were going to be any bailout money spent by the government, (U.S. and Canada) it should be to help folks at the grassroots level. How about a suspension of income tax for the middle and lower income earners for a period of time. Wouldn’t that boost the free market economies and help the little guys better than giving money to a corporation regardless of size.
I sure enjoy your passion. Perhaps you should start a petition or something against the local government officials who are not doing their job. Is there such a thing as “recall” or “impeachment?”
Aaaa Yes Roland. “Maximizing profits is the tenet of capitalism. “At the expense” of others is where the profits come from.” I know this. I have been a business man all my life.
But where does the “expense” stop. What are the limits is what I am asking.
By definition, in “Totally Free Enterprise” there are no limits to the expense “inflicted” for the profit gained.
The rules were being followed when Ford Motor company paid out of court settlements with gag orders imposed to the mutilated survivors and next of kin to the immolated owners of Pinto cars with fatally designed fuel tanks. It was “cost effective” to pay off the survivors then to recall the Pinto, or even alter it to make it safer. This expense “inflicted” upon the Pinto owners gave direct profit to Ford. But that is the idea you say. “expense = Profit”.
If one of the Pinto owners had gone out and performed a contract killing for money, he would justly so been prosecuted for it. But the Ford executives that said “pay the survivors off because we make more Profit”, are not even considered immoral, because they are “true Free Enterprisers”.
Why is it that if a ordinary guy spots some money laying on the floor of a bank, picks it up and leaves the building he is charged with theft and may go to jail as punishment. BUT, if a Bank CEO figures out that if he changes the the way a customers bank account is managed without telling the customer, he may reap the “profits” until the customer catches on. And can the customer call the Police and charge theft? NO! The strongest reaction for the customer is to hire a lawyer and sue the back. Because in the “Totally Free Enterprise” system it is all right for the Corporation to do anything to gain a profit. it is not theft. It is Profit. See the difference?
If we allow the “Concept” of “Totally Free Enterprise” to be the utopian view of the business world, we will be continually subjected to Corporations pushing the profit margin up at the “expense” of the common citizen. And according to the Utopian View, there is no expense to great.
And that is the problem. There is no expense to great.
So what if the small percentage of Pinto owners gave up there lives, health or loved ones as an expense for Ford’s profits. It is the “system”.
We the public have been told for years that it is “the best system we have”.
If you are locked into a 8′x8′ room and have a live hand grenade in your hand and the “pin” is missing, then hanging onto the grenade is the “best thing you have”. Does that mean it is a desirable situation you are in?
I really don’t know of anyone who could not think of a better situation. Like being outside the room!
If we allow the tenet that “Maximizing profits is the tenet of capitalism” and have no other rules to guide the Corporations, then “who” is to say when the “expense” has become too great. Because one of the first things “Big” Corporations do is buy off the controlling forces. They buy off the judicial system. They buy up the news media to control our thinking. If some one robs a Bank and kills ten bank tellers it would be printed all over the world for weeks. When Ford burned all those people in the Pintos the only news was about how much the Lawyer made in the settlement.
If “Totally Free Enterprise” is the utopian tenet, that is the same as the NHL saying that slashing and spearing to make a play is “Ok”, unless the Officials see you. A broken hand is the “expense” you inflict on the other player for the profit of your goal. To avoid getting caught, and to win more often, you bribe the Officials.
And this is OK. It is “Totally Free Hockey”. And the teams that are winning say it is “The best System we Have”.
The “Big Business” of Wall Street, are not the builders of our economy. They only come into existence “after” there is a strong economy in place. They are the scavengers and bottom feeders that sneak in the back door (where there are no rules because of the “utopian” view of FREE Enterprise). They come up from below and tear out the guts of the economy. They feed on manufactured and just plain stolen profits until they have fed so much that the economy dies. Without pre defined rules, we are too slow to react and stop the feeding frenzy before it is too late. Industry is devoured and workers unemployed, but PROFITS have been made. Ponzi schemes fall apart. Markets crash, but Derivatives still pay off, funded by Federal Bail outs. The world is in chaos, lives are ruined or lost but Profits are made. The rich are so rich they do not care. It is hard to worry when you have 800 Billion dollars US in the bank and your houses and your 300 foot Yacht are paid for.
Gee! Did I just explain where were are today?
Profits are made at others expense. Yes.
But we MUST define the limits of those expenses BEFORE they are crossed.
This was an article from the St. Petersburg Times Newspaper on Sunday.
The Business Section asked readers for ideas on “How Would You Fix the Economy?”
I thought this was the BEST idea. I think this guy nailed it!
I think we could just substitute Mr Prime Minister for Mr President and check the Canadian numbers.Mike
Dear Mr.President,
Patriotic retirement:
There are about 40 million people over 50 in the work force;
pay them $1 million a piece severance with stipulations:
1) They leave their jobs. Forty million job openings – Unemployment fixed.
2) They buy NEW American cars. Forty million cars ordered – Auto Industry fixed.
3) They either buy a house or pay off their mortgage- Housing Crisis fixed.
All this and it’s still cheaper than the “bailout”.