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My guess is that the government probably didn't want to see a lead up of stories written over several days that made educated guesses about the size of the deficit to come. Rip off the bandage in one fell swoop, so to speak. Finally, Mr. Harper pledged during the election campaign to avoid running a deficit. I'm sure the tactical thinking here was to get the bad news out of the way.
As far as the size of the figure goes, I'm not surprised by it because I think the November economic update which predicted a surplus of $100 million was so vastly off that nobody believed it. Private sector forecasters have said we've been in deficit even without the stimulus package to come.
Jim Quinn writes: We will be right back where we were in 1993, if not worse, when Canada was described as a G7 country with Banana Republic finances. Interest rates will have to rise and when inflation takes off, as it will have to. We are likely to be in worse trouble than ever -- essentially stagflation. If there is any consolation it is likely that the United States and Britain will be in worse shape, which will make our hole that much more difficult to get out of. I have two specific questions:
1. Isn't t all of this simply stopgap? Stripping away the rhetoric, governments are simply inducing credit and funds, in one way or another, in anticipation that citizens and institutions will spend with reckless abandon (a new car in every driveway and a new museum/gallery/arena in every town).
2. Governments are about to pour money into trying to preserve a status quo; a status quo that embodies the worship of free markets; endorsement of greed, hence growing disparity between the relative rich and privileged (include the public sector in that) and the rest; and, up to now, a tacit acceptance of immorality (white collar crime not a priority, especially in Canada). Isn't a culture change required to achieve long term benefit?
Brian Laghi: Great questions.
Is this a stopgap? Hard to say, of course, until we see whether flooding the system with liquidity will actually get people spending. I'm not an economist, but psychologically, I can see how some Canadians might say to themselves that this is not the time to buy a new car or flat-screen television. It may well be that voters take their tax cuts and put them in their pocket. If that's the case, I'm not sure what the government's Plan B is.
On the question of culture change, I think you're making the same point, to some degree, that Barack Obama made at his inauguration, and that is that we probably all have to dust ourselves off and work a little harder, be a little more patient and maybe accept a little less. Your guess is as good as mine whether we're prepared to accept that kind of medicine, but I do think that tough times will force a cultural change of sorts. Maybe the three dollar designer coffees will become a thing of the past.
Henry Zimmer from Victoria writes: Do you think the budget will postpone or repeal the proposed distributions tax on income trusts to ensure that Canadians who hold them in RRSPs/RRIFs will be allowed to generate additional income?
Brian Laghi: Hi Henry. Anything's possible, but Mr. Flaherty went out on a real limb when he made the original announcement, and the finance department has been pretty clear that it doesn't intend to postpone or repeal the tax. It probably wouldn't be prudent to ignite another firestorm on this issue.
Jim Kelly from M'Chigeeng writes: Mr. Laghi, thank you for initiating this discussion with your video preview. Your words gave me pause for thought: 'But perhaps what's been lost in all the tumult is just how this government will deal with the anxieties of Canadians as they deal with the current economic turmoil.' Am I missing something?