You have options, sirs

by Aaron Wherry

Another of those pesky economists suggests the federal deficit will require some attention at some point. Luckily, Messrs Ignatieff and Harper have a choice of solutions. Unfortunately, “none of the above” is not an option.

Ottawa needs to acknowledge it can not return to surplus as early as it projected, and that tax hikes, even temporary ones, or deep spending cuts need to be incorporated to complete the task, said a report Friday from a leading fiscal forecaster…

Mr. Orr said there are two options available to return to surplus… In the first, Mr. Flaherty could wait for Canada to “grow out” of the deficit, which would not result in a balanced budget until the 2017-18 fiscal year. Mr. Orr cautioned that this option is based on the assumption that Ottawa caps program spending growth at 4%. Since the late 1990s, after the federal government successfully steered the country out of deficit, annual program spending has increased at a rate of between 6% and 8%…

The other option would be to introduce temporary tax increases, such as increasing the GST back to 7%. That would raise the money necessary to get the budget balance back into the black by the original timetable, 2013-14. Mr. Orr said a timetable could be produced under which the GST heads back down to 5%, but would be conditional on the government keeping the books balanced.




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You have options, sirs

  1. or the price of oil is 1 $ dollar more a barrel and well sell more barrels than projected! incidentally see the newly signed pipleine which just so happnes to increase the amount we will be selling to the USA by more than projected.

    • Does that count the new find in the Gulf of Mexico?

      • eta on supply starting from new find in Gulf is around 2020 as a best case scenario so does not affect cuurent pricing projections and by the time it's on line we will be in a whole new orld as other sources are drying up at a phenomanal rate.

  2. Wouldn't temporary sales tax increases simply cause Canadians to defer major purchases, thus hurting the economy?

    • On the contrary, it would pull major purchases (durable goods) forward before the hike date. Consumption would be hardly affected–just as Tim Hortons didn't sell much more coffee because each cup was a penny cheaper.

    • Just as the 2% cut in the GST didn't do much to increase sales, a 2% rise, even a temporary one, likely won't change most people's spending habits. If people need a fridge, they'll get a fridge. If they want a TV, they'll get a TV. Deferring major purchases could occur, but only if it's up for a short period – people may wait a month or two to buy something, but not years.

      I agree with Andrew, a small rise in purchases before the hike followed by a small dip, then the opposite when the plan is reversed years down the road – for 2%, that's about it.

  3. By that same logic, all we need to do is go out and buy a fridge and a car every payday and the world will be just fine.

  4. C'mon, Harper hasn't even begun to sell off stuff yet. That'll fix everything up just fine. Won't it?

  5. That cutting of the GST by the Conservatives doesn't look so brilliant now, does it?

  6. What will be the budgetary impact of the Afghanistan withdrawal in 2011? Or is that already factored into projections?

  7. I would not expect either Harper or Ignatieff to be forthcoming on this issue and the fault lies with the Canadian public. Of course it would be nice if the economy recovered fast enough to eliminate the deficit quickly and both the Liberals and Conservatives will argue that their proposals will do just that.

    A more interesting question is what is the plan if the economy doesn't right itself? More specifically will the priority be balancing the budget, or status quo? Earlier Ignatieff had stated balancing the budget; Harper said he would let the deficit run as long as necessary. I don't think any politician that talks about slashing spending, raising taxes or potentially perpetual deficits will do well at the polls. Which is a shame, since it is a debate worth having.

  8. Ah – HST, now known as Harper Sales Tax – sneaky way of taxing.

  9. My fear is that the Conservatives, if they remain in power, will simply deal with this problem by slashing spending in regions of the country that don't vote Tory.

  10. Thread de-rail .. Sorry an accident. Forgive.

    Canada & US map Arctic sea floor together. Tin foil hat time. The US sonar equipment has sub surface capabilities that can map features such as geological formations conducive to resource production.
    Air cannons?
    Update: Confirmed From cited article;
    " The source array consisted of three Sercel G-guns with a total volume of 1,190 in3 ; the receiver was a digital multichannel streamer with 16 channels (6.25 m per channel in two active sections, each 50 m long) "

    Sercel: G.Gun
    Double Doh Update It's the Canadian ship that has the Air guns. Probably have to share data.

    We return you to you regularly scheduled programming.

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