Tag Archives: David Dodge

Outrage at the deficit is all politics

Ian McDonald is saying what I have heard all this week about the deficit.

A federal deficit that was forecast at $34 billion as recently as the January budget is now projected to be a least $50 billion. That’s quite a miss, 50 per cent on the upside, from a finance department better known for underestimating the surplus during the era of the fiscal dividend.

Then again, as our editorial page noted the other day, $50 billion isn’t what it used to be. It doesn’t go far as it used to, either. Or in the immortal words of Yogi Berra, you get cash and it’s as good as money.

In the House of Commons, the opposition parties were shocked and appalled, demanding that Finance Minister Jim Flaherty either resign or be fired, his credibility in tatters, his competence destroyed.

Then the Liberals demanded that Flaherty add another $1 billion to the ballooning deficit by lifting regional variations on qualifying for Employment Insurance and imposing a national minimum standard.

And of course, the NDP would like Ottawa to guarantee the pensions of autoworkers that are on the table in talks to restructure the North American auto industry.

As for the Bloc, it just wants more money for Quebec, starting with the forestry industry.

In politics, you have to make more than the usual allowances for hypocrisy.

It was in January that Jack Layton and the entire Liberal party were screaming for an Obama like stimulus package (which would have required a $200 billion deficit to proportionately match).  While I am a deficit hawk and I hate seeing this much debt, 3% of GDP is not out of control if it is only short term.  Bank of Canada Governor David Dodge is saying the same thing.

“The Canadian federal deficit of 3 percent of GDP, in a year where the output gap is as large as it’s going to be, is certainly not inappropriate,” Dodge, a former deputy minister with the Finance Department, said in remarks at an economics conference in Toronto.

He went on to say that all Canadian jurisdictions need to commit to balancing their budgets after this mess is over and pay it off.  What frustrates me in all of this, we are missing out on the real debate which needs to happen during a financial recession and that is how do we get out of it and how do we best handle the suffering that comes with living in the Great Recession.  We need to have more discussions on the ramifications of the proposed changes to EI versus leaving it alone.

The Liberals have taken a position that is clear and easily explainable. To summarize, more pogey now. They want employment insurance, as we euphemistically call it, to be available anywhere across the country after only 360 hours of work. The Liberals believe 150,000 people would be helped by their policy, but the political benefit is even greater. The employment insurance system we have now is so complex and difficult to understand that any Canadian who fears losing his job would rightly worry about whether he would quality for payments. Expect the worriers to back the Liberal plan.

As it is now, Canadians must work between 420 and 700 hours to collect EI, depending on the rate of unemployment in the region in which they live. Those eligibility requirements mean that 40 per cent of people who pay into the plan aren’t actually able to collect. For EI purposes, the government has divided the country into 58 regions and length of time that EI will pay out varies by region.

The Conservatives have chosen to champion this absurdly complex system, although they certainly didn’t invent it. Liberal leader Michael Ignatieff wants change so Prime Minister Stephen Harper is against it. It’s as simple as that. The substance of the matter is irrelevant.

The side benefit of the pogey issue, perhaps accidental, is that people have actually started to pay a bit of attention to a big-ticket program that does need a serious rethink.

There are also other debates to had about taxation (did the Conservatives cut too much from the GST?) and why despite all of the stimulus money, we are still seeing serious job losses not only in Ontario but even in Alberta?  With our economy being battered by the problems in the United States, maybe it is time to rethink our economic relationship with the United States, I am not saying with become protectionists but rather ask ourselves is it is wise to be so closely hitched to an economy that could be in trouble for years to come?