IN THE NEWS ~ Critics blast Flaherty over economic update
November 9th, 2011 - 2:02pm
Critics blast Flaherty over economic update
Finance Minister Jim Flaherty, speaking in Calgary on Tuesday, acknowledged the economy is performing worse than predicted.TODD KOROL/REUTERS
OTTAWA—Finance Minister Jim Flaherty acknowledged the economy is performing worse than predicted but did little in Tuesday’s mini-budget to stimulate economic prospects for Canadians.
The deteriorating global situation threatens to knock the legs out from under the Conservatives’ economic strategy, which calls for the federal government to shift into an era of tough spending restraint after a two-year, $48 billion spending spree to offset the recession.
“We have to be realistic about what’s going on in the world,” Flaherty told reporters after releasing the annual economic update. “We are living in a highly uncertain world.”
In a major shift, Flaherty admitted the Conservatives won’t live up to their signature election campaign promise to whittle away Ottawa’s record budget deficits by fiscal 2014-15. Largely because of reduced tax revenues from slower-than-predicted economic growth, the Harper government will be unable to wipe out the budget deficit until fiscal 2015-16, Flaherty said.
If true, this could have a direct impact on the ability of the Conservatives to meet their election campaign promise of more tax breaks for Canadians.
Election pledges of income splitting for working families, additional tax breaks to encourage physical fitness and a doubling of contributions to tax-free savings accounts won’t happen until the budget is balanced.
As first reported by the Star, Flaherty confirmed two measures the government is taking — scaling back a planned hike to employment insurance premiums and extending a work-sharing program — in a bid to safeguard the Canadian economy from global turmoil.
Flaherty’s update drew flack from several quarters. New Democrats criticized it for doing little to help Canada’s unemployment, which experienced a surprising jump last month.
And the Canadian Taxpayers Federation took aim at the Conservatives for missing their deficit target made just seven months ago and forcing Canadians to wait longer for promised tax relief.
“If he doesn’t deliver a balanced budget, he’s not going to deliver tax relief. He’s only going to deliver more debt,” said Gregory Thomas, federal director of the CTF. He urged the Conservatives to cut costs to balance the budget sooner.
NDP MP Peter Julian said the fiscal and economic update is silent on measures to put Canadians back to work, despite October’s statistics showing the economy lost 54,000 jobs.
“There’s not a single new measure for job creation at a time when the economy desperately needs that,” Julian said in an interview. “Their overall approach is fundamentally flawed.”
He said the moves to limit a payroll tax increase as well as extend the work-sharing program are scant consolation “for the families that are losing a breadwinner.”
“And we’re talking tens of thousands over the last few weeks,” Julian said.
But in his speech in Calgary, Flaherty suggested that the government was trying to walk a line between competing demands.
“On one hand, we have people urging us to slash spending across the board,” Flaherty said. “On the other, we have calls for billions of dollars of new spending.”
Speaking later to reporters, he made clear the government has no appetite for big-ticket programs to stimulate the economy, like the spending spree that just ended.
“If we were to continue with that plan now, we would create a structural deficit in Canada. We would end up in the same kind of mess quite frankly that some other countries in the world have gotten themselves into,” Flaherty said. “We’re not going there.”
Flaherty didn’t completely discount the chance that the budget could be balanced by 2014-15, saying that remains the government’s goal but said current turmoil made it impossible to say for sure.
Interim Liberal Leader Bob Rae said Flaherty’s update ignores the provinces, which are sure to see their own deficit targets slip, too, meaning a worsening picture overall for government finances across the country.
“He’s not admitting that our fiscal challenge is even greater than he’s pretending it is. If he misses his targets, you assume that everybody else is going to miss theirs,” Rae said.
He also criticized Flaherty for not freezing employment insurance premiums altogether, saying it makes “no sense” to hike payroll taxes when the economy is slowing.
Canada’s recovery from the recent recession has been slowed by the lacklustre performance of the economy in the United States, which takes the bulk of Canadian exports. And the shaky situation in Europe, where the debt crisis in Greece could easily spread to undermine the stability of larger economies such as Italy and Spain, has increased the risks of another worldwide economic slump.
As a result, Flaherty cited forecasts that show Canada’s economic growth dropping sharply this year to 2.2 per cent from 2.9 per cent predicted in the March budget. The forecast for 2012 is equally gloomy, with growth expected to come in at 2.1 per cent — much below the 2.8 per cent in March.
With files from Susan Delacourt
<:article id=post-158436 class="post-158436 post type-post status-publish format-standard hentry category-economy category-federal category-finance category-homepage category-homepage-image category-ipolitics category-must-reads category-policy category-politics tag-economic-update tag-gregory-thomas tag-jim-flaherty tag-peter-julian tag-scott-brison">
|Published | Publié: 2011-11-09
Received | Reçu: 2011-11-09 1:47 AM
|NATIONAL POST (NATIONAL)
CANADA, Page: A4
Flaherty sounds like a Liberal
John Ivison, In Ottawa; National Post
If anyone doubts the federal Conservatives now occupy the radical centre of Canadian politics, they should read Jim Flaherty's latest fiscal update. The Finance Minister sounded like a Liberal in his speech in Calgary Tuesday - or at least a Liberal from the period before the party decamped the extreme middle of the spectrum in the last election.
"We will not be bound by ideology," Mr. Flaherty said. "On the one hand, we have people urging us to slash spending across the board..... On the other, we have calls for billions of dollars of new spending that will impose deficits on our children and grandchildren for years to come, or higher taxes that kill jobs and growth. We reject both these extremes. We will continue with our balanced approach." No sooner had he sat down than the NDP was out of the gate, complaining that the fiscal update did not spend enough money to address the "jobs crisis." "We need real sound investment in infrastructure and job creation," said Peter Julian, the party's finance critic.
Spending measures were limited to reducing the maximum potential increase in next year's Employment Insurance premiums to 5¢ from 10¢ per $100 of insurable earnings - at a cost to the treasury of $600-million.
But while the amount of stimulus the NDP would like to see was absent, the government did not bow to pressures to slash the public service with even deeper cuts.
Stephen Harper may have won a majority government but he is still guided by the lessons hard won in minority - that is, govern pragmatically and don't antagonize people by lurching suddenly in one direction or other. If the economy softens further, the government will respond in a "flexible and measured manner," Mr. Flaherty said.
The substance of the fiscal update was no great surprise. The turbulence overseas has thrown Canada's budgetary balance plans marginally offtrack, meaning that the economy won't come out of deficit until 2015-16 - a year later than projected in the June budget. The impact of the European sovereign debt and banking crisis was already apparent in the jobs numbers for October, which showed a net 54,000 jobs vanish. The update reinforced that the Canadian economy is not immune to events overseas - revenues are forecast to be $9-billion lower next year and $10.3-billion the following year, with the consequence that deficits in those years will be larger than projected in the June budget.
But private-sector forecasters are not suggesting that the economy will move into recession and most economists believe the fiscal situation remains manageable. "These are very common-sense adjustments," said Glen Hodgson, chief economist at the Conference Board of Canada. "There's certainly no need to add fiscal stimulus right now, which would just dig the hole deeper. If we've learned anything from Europe, it's that you don't create wealth by running fiscal deficits in perpetuity."
Such long-term planning is anathema to the NDP, which would prefer the Finance Minister jump on his horse and spend in all directions. "Mr. Flaherty needs to stop tinkering with five-year figures and start taking substantial action to kick-start job creation.... All this government can offer is long-term forecasts and re-announced half measures without any new job-creation strategy," said Nycole Turmel, the party's interim leader, apparently oblivious to the cause of Europe's debt crisis - namely, too much debt.
Mr. Julian at least offered a concrete proposal - to use the money the government plans to allocate to reducing corporate taxes to 15% on Jan. 1 to fund infrastructure spending.
But that's the thing about long-term plans - they tend not to work if you abandon them halfway through. By mid-2013, when Ontario reduces its corporate tax rate to 10%, Canada will have a marginal effective tax rate on new business investment lower than the OECD average and significantly more competitive than such countries as the United States, United Kingdom, France and Germany.
Mr. Julian may portray this as "tax cuts to friends in already profitable corporations" but it is a job-creation plan for which the NDP government in Manitoba and Ontario Premier Dalton McGuinty have signed up. And you don't get much more radical centre than Dalton McGuinty. Except, these days, maybe Stephen Harper and Jim Flaherty.
Canadians betrayed by deficit flip-flop, tax watchdog charges
Economists say revising the deficit reduction timetable to reflect global circumstances makes fiscal sense, but a taxpayers’ watchdog group insists the Conservatives have betrayed a key campaign promise that propelled their party to re-election with a majority mandate.
Finance Minister Jim Flaherty released the federal fall economic update in Calgary Tuesday, delaying the previously planned target to balance the books by at least a year. During this year’s election campaign, Prime Minister Stephen Harper promised to slay the deficit by 2014-15, but Tuesday Flaherty said that won’t happen until 2015-2016, or the following year.
Gregory Thomas, federal director of the Canadian Taxpayers Federation, rejected the government’s explanation that the international situation warranted the adjustment, calling it “a load of BS.” He said the revised timeframe means Harper won’t follow through with pledges to double the tax-free savings account and extend income-splitting to working couples — both key campaign promises that were contingent on when the deficit would be eliminated.
“Essentially he’s saying is he’s not going to deliver on his key promises during his term in office, and that’s why people voted for him,” Thomas told iPolitics. “If people wanted higher government spending, bigger deficits and no tax relief, they would have voted NDP.”
But economics professor Allan Maslove of Carleton University’s School of Public Policy and Administration was “relieved” the government did not stick to its timetable by imposing “more draconian measures.”
“One route they could have gone is to say the spending cuts had to be even deeper than they’re currently planning, and I’m somewhat relieved they didn’t choose that route, because I think that would have been very damaging to the economy ultimately,” he said. “When you’re in tough economic times, cutting spending isn’t the way to get out of it. So the fact they are prepared to be a little bit flexible and allow the deficit to continue a little longer is a positive thing.”
Maslove believes the government can achieve its revised targets, but warned that in times of huge uncertainty, if something “big or negative” happens in Europe or elsewhere, all projections will fly out the window.
The Conservative government is now projecting a deficit of $31 billion in 2011-2012, $27.4 billion in 2012-2013, $17 billion for 2013-2014, $7.5 billion for 2014-2015, $3.4 billion for 2015-2016 and a surplus of $500 million for 2016-17.
Economics professor Ron Kneebone of the University of Calgary’s School of Public Policy said more critical than a delay on cutting the deficit is the projected size of the federal debt – and he calls this a “good news” story.
“Although the government continues to run deficits, the size of the debt as a fraction of GDP, our collective income and our collective ability to retire debt, is not growing much at all, and in fact it will begin shrinking long before we balance the budget,” he said.
Running deficits during times of slow growth, uncertainty and recession is sensible fiscal policy.
NDP finance critic Peter Julian was not surprised by the revised targets because he said the government has been “wildly inaccurate” in past forecasts. But his gravest concern is that the Conservatives have presented no concrete plan to address Canada’s job crisis.
“The government wants to go down the same path, which is a very unbalanced approach,” he said. “On the one hand, they’re looking at an austerity budget and cuts in services for middle-class and poor Canadians; on the other hand they’re continuing along the lines of these massive corporate tax cuts.”
Liberal finance critic Scott Brison accused Flaherty of manipulating deficit targets for political gains.
“The reality is there was never a possibility of balancing the books in 2014. That was a campaign promise that had no foundation. His deficit targets are created around politics, not economics,” he said.
© 2011 iPolitics Inc.
|Published | Publié: 2011-11-09
Received | Reçu: 2011-11-09 5:20 AM
ACTUALITÉS, Page: 9
Jim Flaherty retarde d'un an l'atteinte du déficit zéro
A trois reprises plutôt qu'une, hier, le ministre des Finances, Jim Flaherty, a évoqué la souplesse pour justifier les nouvelles mesures de sa Mise à jour des projections économiques et financières qui prévoit le report d'un an du retour à l'équilibre fiscal.
Dans un discours lu devant la Chambre de commerce de Calgary, M. Flaherty a confirmé que devant les turbulences économiques internationales, il doit revoir «l'ajustement en fonction du risque» et «prévoir le coussin de sécurité» que requerra son budget du printemps prochain.
L'objectif du déficit zéro sera ainsi atteint en 2015-2016, soit une année plus tard que prévu dans son budget de juin dernier, car les données publiées en même temps par son ministère annoncent deux années difficiles sur le plan économique.
Pour soutenir la population, le gouvernement confirme le gel de l'augmentation du taux de cotisation de l'assurance emploi à son niveau de 2011, pour l'année qui vient. La hausse prévue baisse de 10 cents à 5 cents.
Ce taux ne devra donc pas dépasser 1,83 $ par tranche de 100 $ de rémunération assurable, selon le ministre. Cette mesure se traduit par une économie de 600 millions $ pour les employeurs et les employés.
«Ce n'est qu'un petit pas dans la bonne direction», a répliqué le Nouveau Parti démocratique (NPD) par voie de communiqué, tandis que la chef intérimaire Nycole Turmel précisait que cette annonce n'améliorerait pas «les chiffres inquiétants reliés au marché canadien de l'emploi».
«Même si le ministre Flaherty a annoncé aujourd'hui que les conservateurs faisaient marche arrière en ce qui concerne leurs cibles irréalistes de réduction du déficit, il est arrivé les mains vides [...] face au problème de chômage grandissant au Canada», a-t-elle ajouté.
M. Flaherty a également annoncé la prolongation d'une année du programme des accords de travail partagé d'une durée de 16 semaines, une mesure évaluée à 10 millions $ et qui touche en ce moment 15 000 personnes.
Ottawa, a-t-il assuré, se tient prêt à toutes les éventualités. «Nous ne nous enfermerons pas dans un carcan idéologique lorsqu'il faudra prendre des décisions pour conserver la vigueur de notre économie», a-t-il dit.
«Le gouvernement est bien au fait des perturbations qui secouent l'économie mondiale [et] nous comprenons que nous devons être prêts à faire preuve de souplesse et de pragmatisme», a ajouté M. Flaherty.
Sans annoncer l'équivalent d'un nouveau plan d'action économique, le ministre soutient que «le gouvernement demeurera prêt à intervenir au besoin de manière souple et mesurée afin de soutenir l'emploi et la croissance».
M. Flaherty s'est décrit comme étant tout sauf inflexible en fonction des circonstances, et son gouvernement prendra «d'autres mesures pour soutenir la croissance et l'emploi» si le besoin s'en faisait sentir.
Le gouvernement et la Banque du Canada ont de plus renouvelé à 2 % la cible médiane d'inflation acceptable pour les cinq prochaines années.
«Un taux d'inflation bas, stable et prévisible est avantageux pour les ménages et les entreprises», a expliqué le ministre.
En lançant sa mise à jour après un préavis de moins 24 heures, et ce, à des milliers de kilomètres du parlement, le ministre a atteint un de ses objectifs, soit de dérouter l'opposition officielle.
Le porte-parole du NPD en matière de finances, Peter Julian, se trouvait en effet à Vancouver, hier, tandis que Mme Turmel, elle, rencontrait le premier ministre Jean Charest à Québec.