Tuesday, December 09, 2008

Deficits: Necessary or Avoidable?

To deficit or not to deficit, that is the question. Finance Minister Jim Flaherty gave us a slightly incredulous rosy picture of budgets to come with teensy surpluses so as to lull the population into thinking the Tories hadn't mismanaged their money. However, the Tories past spending coupled with the tanking of the economy -- especially the massive loss of jobs in Ontario recently, a province traditionally the engine of Canada, always supporting the have-nots to the tunes of billions -- is very, very bad for Canada. Worse, they've focussed on sticking it to the opposition while Ontario has sunk into have-not status. It's better for Canadians from west to east that Ontario generate taxes not suck up taxes.

And so what to do? Clearly, the economy needs stimulating. Infrastructure building (or in our case rebuilding) is a time-proven way to create jobs and to provide a foundation for a thriving economy -- good roads, good public transit, good water leads to more hours at work, less on the road, and a healthier population that can be at work not at home sick. But succcessive governments have tossed such meagre resources at Canada's infrastructure for so long that the infrastructure deficit is now huge. Only tens of billions will get it back to the level it was in the 1970s, and only tens of billions will stimulate enough good-paying, long-term jobs to get the economy going. Plus Henry Ford was right: to sell product (or knowledge), you need to pay your workers enough so that you have a built-in buying market. That's going to take more money than is in the Federal treasury. They will have to go into deficit because they can no longer download to the provinces and cities. We're still reeling from the downloading of the 1990s.

And so will the Tories be realistic in their budget? Will the coalition government return to surpluses as quickly as they can? Will successive governments be able to avoid an addiction to deficits as happened in the decades leading up to the 1990s? Unfortunately, current global crises will force our government's hand, whichever government is in power, towards going into deficit. We just have to hope they climb out as quickly as possible.

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