Why this stimulus stuff will all soon be forgotten

By Paul Wells - Friday, January 30, 2009 at 1:00 PM - 79 Comments

Hello? I am here to lodge a complaint on behalf of the Campaign Reporters’ Guild under Section 2. (a) of the Grievance Manual, “Time Utterly Wasted on the Campaign Trail.”

I will have you know I was there in Winnipeg. I was there at the vegetable distribution plant. I was not alone. There had to be two dozen fully accredited campaign reporters there, on that sunny morning in the second week of September. We got up early. We dressed warmly because a vegetable distribution plant is basically a big refrigerator. We stood around with our cameras and our digital recorders, amid the carrots and the turnips, and waited for nearly an hour for Stephen Harper to show up and make precisely one promise.

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Budget ’09: Fearful asymmetries

By Paul Wells - Wednesday, January 28, 2009 at 12:30 AM - 33 Comments

Andrew Coyne will be leading our budget coverage in the next edition. He felt more strongly about the budget than I did, as you will already have noticed. My own column will be kind of wistful. I do want to make a few points, not necessarily connected, in the meantime.

• Last spring I wrote a column arguing, tongue in cheek, that Liberals and Conservatives were already running a coalition government. Andrew wrote a column more recently, suggesting more seriously that they give such a thing a try. This budget is clearly designed to form the basis for a Conservative-Liberal coalition de facto. It’s surprising, though I suppose it shouldn’t be, how little attempt the Conservatives make to placate the Bloc or the NDP. In the latter case especially, that’s obviously a big change. The cozy little arrangement by which Jack Layton and Stephen Harper paid to Martin Liberalism, and which lasted well after the 2006 election, is over. This is the price Layton pays, perhaps gladly, for turning the NDP caucus into a machine for voting No to the Conservatives. But it points up an interesting feature of the political landscape since the last election and, at least, until the next: the Liberals are going to govern in coalition with somebody. It can be the Conservatives or it can be the NDP with Bloc support. But the Conservatives can’t govern alone and they can’t govern durably with the other opposition parties. And the NDP-Bloc can’t govern alone or with the Conservatives. That leaves the Liberals, and only them, with the freedom and the obligation to choose. Continue…

Budget '09: A view from the West

By Nicholas Köhler - Tuesday, January 27, 2009 at 8:33 PM - 2 Comments

Response to today’s federal budget was slow to seep out of Western Canada today, with premiers in Alberta, Saskatchewan and Manitoba still mum on what they thought of Finance Minister Jim Flaherty’s stimulus package. But one big city mayor, Calgary’s Dave Bronconnier, appeared pleasantly surprised with what the budget puts on the table. “There is much to like,” Bronconnier told a radio show this afternoon, part of a media blitz the mayor conducted in the wake of the budget’s release. “What I believe the government was trying to do, which is a short-term stimulus to deal with the creation of jobs. And when you look at it short-term, $4 billion for infrastructure funding, that is directed towards jobs.” Continue…

Budget '09: Make the next generation pay

By Duncan Hood - Tuesday, January 27, 2009 at 8:06 PM - 3 Comments

So the budget is out and it looks like the Tories are going to take us time travelling. Poof! It’s the 1970s again, and there’s no problem the government can’t spend its way out of. Never mind that it didn’t work then, and it left us with a government debt that crippled a generation and was only recently paid down to a reasonable level.

The truth is that we’ve been living beyond our means for a while now, and the only solution is to get used to living within our means. There is no black magic that can make that ugly truth go away. Running consecutive deficits is simply a way of borrowing more money in a desperate attempt to keep the party going. But it won’t stop the pain, it will just delay it. It’s like dealing with a hangover by going on another drinking binge. Excessive government debt will have to be paid back down again in the future, so we are simply punishing “future” Canadians for our mistakes. By running up a deficit we may make life better now, but we’re making our future less bright.

I saw Warren Buffett give a talk in Toronto about a year ago, and he observed that there has never been a case where a government had run up a large debt where it didn’t subsequently crank up the money presses and allow the value of its currency to fall, thus reducing the amount it owes to its creditors. Problem is, that usually leads to inflation. No one can predict the future, but with governments running up big debts all over the world, it doesn’t seem impossible that global inflation could be a huge problem five years from now. If it is, it will only make things worse.

Anyone would be in favour of stimulating the economy if they knew it would make things better, but I’m not 100 per cent sure that it will. Not the way this budget does it, anyway. Even the Tories seem to have misgivings about what they’re doing, hinting that they’re being pushed into something that they’re not entirely comfortable with. I can understand spending government money on bridges, roads and other infrastructure projects, because that stuff needs to be done anyway. But I’m not sure I like the idea of bankrolling my neighbour’s kitchen renovation, which is exactly what this budget forces me to do. It will no doubt help my neighbour, but I don’t think it will help the country—and it certainly won’t help me.

Budget '09: The Reaction

By macleans.ca - Tuesday, January 27, 2009 at 6:27 PM - 7 Comments

NDP leader Jack Layton: “This budget fails to restore confidence in Mr. Harper’s ability to protect the vulnerable in Canada.”

Bloc leader Gilles Duceppe: “Le bloc québécois va voter contre ce budget injuste et idéologique, qui ne répond pas aux priorités du québec.”

Green Party leader Elizabeth May: “A deficit of staggering proportions will be created with nothing more than a wish and a prayer in the government’s projections to return to balanced budgets. It is hard to imagine the budget being supported by fiscal conservatives or social progressives. Indeed it is hard to imagine anyone thinking this budget meets the needs of Canadians.”

“To top off the economic incompetence of this budget, there is nothing for the environment.”

Liberal MP Scott Brison: “It’s tough to trust this government on the numbers. The deficit numbers keep growing, and we’re concerned that if we can’t trust their numbers over the last couple of months, we can’t trust it over five years.” Continue…

Budget '09: Tories take a final leap into the void

By Andrew Coyne - Tuesday, January 27, 2009 at 4:46 PM - 165 Comments

Say what you like about the Tories: they don’t do things by halves. When they spend, they spend. When they go into debt, they do it $100-billion at a time. And when they decide to put an end to conservatism in Canada — as a philosophy, as a movement—they go out with a bang.

We can safely say that the strategy of incrementalism, at least, has been put to bed. With this historic budget, the Conservatives’ already headlong retreat from principle has become a rout: a great final leap into the void. For there will be no going back from this, for the party or for the country. Whatever the budget’s soothing talk of “temporary” this and “extraordinary” that, and for all its well-mannered charts showing spending obediently returning to its pen, deficits meekly subsiding, “investments” repaid in full, we are in fact headed somewhere we have never been before. We are on course towards a massive and permanent increase in the size and scope of government: record spending, sky-high borrowing, and — ultimately, inevitably — higher taxes. And all this before the first of the Baby Boomers have had a chance to retire, and cough up a lung.

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Budget '09: Stimulus

By Philippe Gohier - Tuesday, January 27, 2009 at 4:34 PM - 1 Comment

Stimulus spending is on nearly every government’s agenda these days. The International Monetary Fund has encouraged governments that are able to do so to kick in an extra two per cent of GDP in government spending to cure the economic hangover that’s afflicting markets around the globe. And though Jim Flaherty told Parliament his government’s financial package “exceeds the target recommended” by the IMF, Ottawa’s stimulus spending will come in at 1.9 per cent for 2009 and another 1.4 per cent for 2010. Still, the Conservatives plan to inject nearly $40 billion into the Canadian economy over the next two years, with the provinces expected to contribute another $11.6 billion.

The federal government projects its stimulus package will protect or create 190,000 jobs in Canada. Opposition leaders didn’t dispute the figures on Tuesday, but they did worry Ottawa won’t be able to deliver the funds effectively. “Are they going to get the money out the door?” asked Liberal leader Michael Ignatieff. NDP leader Jack Layton worried the requirement that cash-strapped municipalities match the funds committed by the federal government to infrastructure projects will compromise the program’s success. The budget “requires governments that don’t really have the money to match the funds,” Layton said, “which means those jobs won’t be created and those numbers won’t be reached.”

Infrastructure spending will account for nearly a third of all stimulus spending, totaling $12 billion in all. A quarter of the funds have been earmarked to restore Canada’s aging roads, bridges, and other projects the government considers “shovel-ready.” Projects include an extra $407 million for Via Rail to improve its passenger rail services, $323 million to restore federally-owned buildings, and $212 million for repairs to Montreal’s Champlain Bridge. An additional $2 billion has been committed to long-overdue maintenance projects at colleges and universities. Other measures include a $1 billion fund for green infrastructure projects as well as funding for expanding broadband Internet access.

The $12 billion commitment supplements the previously-announced $33 billion Building Canada Plan, which focuses on longer-term projects. Critics claim the Building Canada Plan has been largely ineffective so far, with few of the funds having been spent since its inception. But Finance Minister Jim Flaherty promised that the newly-announced infrastructure stimulus package would find its way into the economy much quicker. “We must take action now,” Flaherty said, “to reduce red tape and needless duplication.” Budget documents show Ottawa is aiming to break ground on a number of projects within 120 days, or just in time for the upcoming construction season.

However, Toronto Mayor David Miller says Ottawa has done little to lift the restrictions on accessing the infrastructure funds. According to Miller, municipalities will still have to apply to the federal government to finance infrastructure projects, meaning the money won’t flow as quickly as local mayors would have liked. Miller aslo points out there are no guarantees Ottawa and the municipalities will agree on which projects deserve funding. “The projects are the priorities of Ottawa, not the cities or towns,” Miller says.

To revitalize the moribund construction industry, Ottawa has committed a total of $7.8 billion over two years to the housing sector. The most expensive measure, a one-year Home Renovation Tax Credit worth up to $1,350 per home, is expected to cost the government $3 billion in the coming fiscal year. Current home owners also stand to benefit from an extra $300 million allocated to the federal government’s ecoENERGY Retrofit program, which the governments plans to use on 200,000 home retrofits.

However, Ottawa will be looking for the provinces to pick up part of the tab for some of its other large-scale investments in the housing sector. The federal government agreed to commit $1 billion over two years to renovate and increase the energy efficiency of up to 200,000 social housing units, but the program is dependent on the provinces kicking in half the necessary funds. In all, provincial governments are expected to contribute $1.5 billion over two years to the housing sector stimulus plan, bringing its total value to $9.3 billion.

Individual Canadians will be expected to pick up whatever slack left by the investments in housing and infrastructure. To stimulate consumer spending, Ottawa is introducing some $20 billion in tax cuts over the next five years. The most significant measures include a 7.5 per cent increase in the basic personal tax exemption (to $10,320), as well as a corresponding increase to the upper limits of the two lowest tax brackets. Seniors will save up to an extra $150 a year thanks to a $1,000 increase to the Age Credit amount.

Budget '09: Economic Outlook

By Colin Campbell - Tuesday, January 27, 2009 at 4:26 PM - 1 Comment

While the government papers the country with stimulus money, exactly what kind of impact it will have is still anyone’s guess. There is no sure bet that the economy will spring back to life anytime soon. Indeed, most economists will admit that precisely how the short term economy reacts to these kinds of measures is, at best, hard to understand and predict. As Finance Minister Flaherty told reporters, “we’re in uncharted waters.”

The government notes that even with billions of dollars being pumped into the economy, the next two years will be bleak. Canada is, after all, somewhat at the mercy of the larger global economy and the speed with which countries like the United States and China can recover.

Also at Macleans.ca
Budget ‘09: Tories take a final leap into the void
Budget ‘09: The Overview
Budget ‘09: Bailout
Budget ‘09: Stimulus
Budget ‘09: Personal Finance

There remains much doubt as to whether or not people and businesses will start spending and lending like they did before the recession—clearly one of the finance minister’s chief aims. “There is no silver bullet to get capital markets going again,” says Glen Hodgson, chief economist with the Conference Board of Canada.

Another big concern is whether government will be able to break from its deficit spending as quickly and easily as it says it will. This budget plans for a return to a ‘small surplus” by as soon as 2013. “Those are very rosy projections,” says Kevin Gaudet, director of the Canadian Taxpayers Federation. He points out that national debt is projected to return to the same level it was in 1999-2000—$542 billion, up from just over $458 billion this year. That means higher debt interest (38 per cent of government revenue) that will burden future taxpayers.

The government, though, sees a light at the end of the tunnel. If all goes to plan, the stimulus will take affect over the coming two years, at which time the economy will begin to rebound. Canada, it points out, is in a far better position to weather short-term deficits than the United States and some European countries, which already carried big deficits leading into the recession. So as surpluses return, Canada’s new debts could, theoretically, be paid off relatively easily. As Flaherty summed up in his budget speech: “It allows us to meet our short term needs while serving our long term goals.”

Budget '09: Personal Finance

By Colin Campbell - Tuesday, January 27, 2009 at 4:19 PM - 2 Comments

A recession budget like this one wouldn’t be complete without a healthy dose of programs and promised aid for those who are hurting the most: working, middle class families.

Behind some of the budget’s biggest promises, like the $200 billion plan to help consumers in search of financing, is an effort to make it easier for families to start spending again, whether that means renovating or buying a house or buying a car.

Also at Macleans.ca
Budget ‘09: Tories take a final leap into the void
Budget ‘09: The Overview
Budget ‘09: Bailout
Budget ‘09: Stimulus
Budget ‘09: Economic Outlook

The government plans to spend $7.8 billion to try and restart the housing and construction industries, which have seen huge slowdowns and job losses in recent months. For homeowners, that means a temporary tax credit to renovate their homes (worth up to $1,350). The amount new home buyers will be allowed to withdrawal from their RRSPs to help finance a new home will go up to $25,000 from $20,000. They could also receive a tax rebate worth as much as $750.

Those living in hard hit communities across the country, particularly those manufacturing towns in Ontario’s rust belt, get special attention in this budget. The government plans to spend $1 billion over the next five years to help workers and communities in southern Ontario. Another $1 billion in the next two years will go towards helping communities across the country to “mitigate the short term impacts of restructuring.”

For those who have already had the misfortune of losing their jobs, there are plans to boost funding for training by over $1.5 billion over the next two years.

Employment insurance premium rates will also be frozen for the next two years—a stimulus worth the equivalent of $4.5 billion, according to the budget.

The budget also includes small tax breaks aimed at the lower and middle class. The lowest personal income tax brackets will be raised by 7.5 per cent, meaning that Canadians can make more money before being bumped into higher-taxed income brackets. (The upper limits for the first two tax brackets will go up to just under $41,000 and $81,000). For families with children, the cut-off level for child benefits to lower-income families will also be raised.

All told, a family making between $15,000 to $30,000 can expect to see tax relief averaging about $650.

While a welcome, helping hand for some, this isn’t exactly a windfall for most families. The tax incentives are modest and narrowly focused (too much so, say critics). This, however,  isn’t overly surprising in this stimulus-obsessed budget. Tax breaks typically  have less impact, at least on the short-term economy, than more direct cash injections. A one-time US$150 billion tax rebate in the U.S. last year, for instance, proved to have virtually no impact, as the money was largely saved or used to pay down debts. 

And the message in this budget to average Canadians is loud and clear: we need you to spend money to rescue the economy.

Budget '09: The Overview

By Colin Campbell - Tuesday, January 27, 2009 at 4:14 PM - 10 Comments

In today’s federal budget the Conservative government outlined an unprecedented, two-year $40-billion stimulus plan aimed at trying to rescue an economy in recession during “extraordinary times.” It includes massive spending on infrastructure and home construction, aid to struggling industries, communities and workers, and renewed efforts to ease access to credit to get consumers spending again.

After days of orchestrated leaks and announcements, the budget gave Canadians the first full picture of an “economic action plan” that the government says could add 190,000 jobs and perhaps have the economy on an upswing again within two years. “We must do what it takes to keep our economy moving, and to protect Canadians in this extraordinary time,” said Finance Minister Jim Flaherty in his budget address.

Also at Macleans.ca
Budget ‘09: Tories take a final leap into the void
Budget ‘09: Bailout
Budget ‘09: Stimulus
Budget ‘09: Economic Outlook
Budget ‘09: Personal Finance

The stimulus plan, which will bring a return to the kind of deficit spending not since the early 90s, leaves few stones unturned—there are promises of financial relief for all (from river-boat tourism on the Saguenay to slaughterhouses on the prairies). Stimulus and aid money will be spread far and wide to all of Canada’s hardest hit industries, including $7.5 billion focused on the forestry, auto and manufacturing sectors as well as to fund clean energy.

Much of the efforts are aimed squarely at returning consumer spending habits to those more in line with the boom times. The government will put a total of $200 billion towards easing the so-called credit crunch, making it easier for businesses to get loans and for consumers to borrow to buy homes and cars. That includes an additional $50 billion (on top of $75 billion already announced last year) to buy up insured mortgages to reassure lenders. As much as $12 billion will be put into a fund to support financing of cars and equipment for consumers and businesses—welcome news for the ailing auto industry.

Almost $8 billion over two years will be spent to kick start the housing and construction industries. The provinces are expected to add an extra $1.5 billion to that figure. “A lot of this is about confidence,” says Glen Hodgson, chief economist with the Conference Board of Canada. Ultimately, people and businesses need to feel comfortable spending again.

Middle class families also stand to gain, though only modestly, through tax cuts and reforms. The cut-off level for the lowest income tax brackets will be raised 7.5 percent. Those who have already lost their jobs in the economic storm will be offered more funding and access to job training (the government will spend $1 billion over two years on training) .

All this comes on top of previously leaked plans to spend $12 billion on infrastructure projects across Canada over the next two years—”the largest building projects in Canada’s history,” notes the budget. While critics have questioned the government’s ability to spend that much money quickly enough to act as a useful stimulus, the budget promises that ‘shovel-ready’ projects will begin in the coming months. That won the plan a ringing endorsement from the Federation of Canadian Municipalities.

This strictly-business budget—complete with the much discussed $30-billion deficit—was a radical departure from the relatively rosy outlook of last fall’s economic statement. And there was no hint of the political gamesmanship that very nearly brought down the government. This time around, just an acknowledgment that times have changed as the reality of the recession has set in.

The sheer size of the spending plan leaves little ground for the opposition parties, which for months have been demanding more serious fiscal stimulus plans, to find fault with the budget. As a share of GDP, Canada’s stimulus package is larger than those in Britain, France, Japan and Germany, according to budget documents.

But some questioned the sincerity of the budget, speculating it’s a thinly disguised effort to appease the opposition. “This is a Conservative budget,” Flaherty told reporters. “Conservatives understand that the government must respond.” Liberal finance critic John McCallum said he wasn’t concerned with the size of the plan, but whether the money is well spent. “The economy needs stimulus. We’re in desperate circumstances,” he said in a television interview after the budget announcement. “We want to make sure the money gets out the door and where it’s needed.”

In the Government Conference Centre, no one can hear you scream

By kadyomalley - Tuesday, January 27, 2009 at 4:12 PM - 22 Comments

10:16:00 AM
Well, hi there, everyone. Greetings from the not-so-distant past before the Jim Flaherty stood up in the House and began delivering his budget speech, otherwise known as earlier this morning. As promised, ITQ is liveblogging from the lockup, although by the time you’re reading this, she’ll be long gone from the hallowed halls of the Government Conference Centre – like the strange flavour of quark she is, and that is the only bit of quantum physics humour I’ll inflict on you today. Probably.

Anyway, as the sharper eyed amongst you have likely noted from the timestamp, I was a little late to the party, which got underway nearly 45 minutes ago, which wasn’t entirely my fault — I’d forgotten about the labyrinth through which one must proceed before being permitted to enter Finance Canada’s vision of purgatory – more on that later, of course; probably much, much more than you ever wanted to know. There are undertakings to sign and wireless modems to demonstrate the utter unoperability of which, and of course, the moment that ITQ dreads more than any other: the seizure of the BlackBerry – her case, BlackBerries in the plural – which are snatched away by a kind but firm Finance official, popped into a baggy and then tossed onto a table with dozens and dozens and dozens of other similarly purloined devices, like that storage locker at the end of Raiders of the Lost Ark (in answer to your question, no, ITQ does not acknowledge the existence of that Crystal Skull). Then there is a sigh, and a furtive last glance at the hypnotic blue blink of the outside world, and one proceeds downstairs. Abandon PINs, all ye who enter.

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