Harper May Have to Break Pledges With Budget Deficit, Bank Aid

[jdobbin]

http://www.bloomberg.com/apps/news?pid=206...mp;refer=canada

arper yesterday said his first move may be a taxpayer- funded package to keep financial institutions competitive amid bailouts in the U.S. and Europe. With the budget surplus shrinking and Harper lacking a parliamentary majority, he'll also probably end up spending more than he wants because he'll need help passing legislation from opposition parties that want to expand social programs.

The lack of control Harper has shown on reducing spending is now likely going to fact head on with the world situation. It won't matter why it happened only that it happened if a deficit is produced.

What some economists are saying:

http://www.thestar.com/Business/article/518196

Merrill Lynch's report suggests Ottawa may succeed in eking out a small surplus this year, but it is on track to recording its first deficit since the 1990s – a political anathema for Canadians.

Wolf is known for his pessimistic views. His analysis in this case assumes no change in fiscal policy. Nonetheless, some of his contemporaries agree the growing likelihood of a deficit will force the Harper government to make some difficult spending decisions if it intends to live up to its no-deficit pledge.

At least one other economist is taking Wolf's argument to the next level. Don Drummond, TD Bank's chief economist, said a multi-billion dollar deficit is not only possible, it is unlikely to be "a one-year wonder."

Edited October 16, 2008 by jdobbin

[kengs333]

http://www.bloomberg.com/apps/news?pid=206...mp;refer=canada

The lack of control Harper has shown on reducing spending is now likely going to fact head on with the world situation. It won't matter why it happened only that it happened if a deficit is produced.

Yup.

[M.Dancer]

he'll also probably end up spending more than he wants because he'll need help passing legislation from opposition parties that want to expand social programs.

So because, perhaps, that opposition parties will want to tack on spending to things we might not need, it will be Harper's fault?

Hey Dobbin, my turn table broke, can I use you to spin my records?

[jdobbin]

Yup.

The Bloomberg report suggests that the Opposition might add on spending that adds to the deficit but the story doesn't seem to know that the Opposition parties don't add lines of expenses to the budget. It is the government that does that and the Opposition says yay or nay.

It will be the government that chooses to go into deficit if it doesn't reduce spending. Reducing spending doesn't mean having to do to the Commons to get permission.

[capricorn]

The lack of control Harper has shown on reducing spending is now likely going to fact head on with the world situation. It won't matter why it happened only that it happened if a deficit is produced.

If there is a deficit, then let the opposition parties bring him down. We would then see if Canadians are angrier at Harper for running a deficit during a worldwide economic crisis or at the opposition for calling another election.

At this time a deficit is pure conjecture. Harper is on record saying he will consider program spending cuts to avoid a deficit.

The Prime Minister, Stephen Harper, hinted Wednesday his re-elected government may look at cutting program spending as a way to avoid the risk of running a deficit.

http://www.financialpost.com/news/story.html?id=882504

[jdobbin]

If there is a deficit, then let the opposition parties bring him down. We would then see if Canadians are angrier at Harper for running a deficit during a worldwide economic crisis or at the opposition for calling another election.

It may come to that if there is year upon year deficits. I suspect that the first budget will get approved but the codicil will be: "Don't run a deficits."

At this time a deficit is pure conjecture. Harper is on record saying he will consider program spending cuts to avoid a deficit.

You're correct. It is conjecture. However, Harper insisted he would not run deficits and derided the Liberals as deficit spenders. He is the boss now and he will have to display some control over his own prolific spending. He doesn't need permission to balance the budget for the most part. It is up to each minister to looks for large savings in their departments.

[drewski]

So because, perhaps, that opposition parties will want to tack on spending to things we might not need, it will be Harper's fault?

Hey Dobbin, my turn table broke, can I use you to spin my records?

if he's really opposed to any of these opposition party rider's he could always just say no and make the bill a confidence motion

[jdobbin]

if he's really opposed to any of these opposition party rider's he could always just say no and make the bill a confidence motion

Exactly. Our system is not really set up for other parties to add on stuff they want. Harper is the boss. It is a measure of confidence. He doesn't have to add any of the other party's wish list for any reason. If the Opposition wants to go into deficit (and I have seen no evidence of that in any of the past Harper budgets), Harper can legitimately take the country into the election by going down in defeat.

As for the person, you replied to. They should give it a rest. The personalizing attacks would by better solved by just making use of the ignore button.

[M.Dancer]

As for the person, you replied to. They should give it a rest. The personalizing attacks would by better solved by just making use of the ignore button.

What attack? I was just complimenting you on your chart breaking record of spinning...

[Moonbox]

The Merrill Lynch economist you're quoting is generally considered to be one of the most consistently pessimistic out there. Further, when he was doing his deficit projections for the year, he basically assumed that Harper would continue to announce spending increases like he has an would not tighten the wallet.

Don Drummond said that Harper would have to either cut spending or raise taxes to avoid a deficit. This is not breaking news or rocket science. Also, Drummond almost went as far as to recommend a deficit. I don't have a link to show you but if you really want to see it go pick up a Globe and Mail because the article is in there.

Like I've been saying for months:

A deficit is probably a good plan right now as long as it's reasonable. As long as we're not running Trudeau/Mulroney sized ones then the long term impact of running a deficit would be negligible but the short term benefits would be tremendous.

[kengs333]

What attack? I was just complimenting you on your chart breaking record of spinning...

Oh, indeed, M.Dancer: you never, ever resort to personal attacks, do you...?

[drewski]

The Merrill Lynch economist you're quoting is generally considered to be one of the most consistently pessimistic out there. Further, when he was doing his deficit projections for the year, he basically assumed that Harper would continue to announce spending increases like he has an would not tighten the wallet.

Don Drummond said that Harper would have to either cut spending or raise taxes to avoid a deficit. This is not breaking news or rocket science. Also, Drummond almost went as far as to recommend a deficit. I don't have a link to show you but if you really want to see it go pick up a Globe and Mail because the article is in there.

Like I've been saying for months:

A deficit is probably a good plan right now as long as it's reasonable. As long as we're not running Trudeau/Mulroney sized ones then the long term impact of running a deficit would be negligible but the short term benefits would be tremendous.

not the globe, but here's what he said from the star

http://www.thestar.com/article/518196

Drummond concurs with Wolf's $10 billion deficit estimate for next year. If Ottawa's fiscal policy remains as is, he believes the deficit will likely stay near that level in 2010. He doubts Harper will raise taxes, but warns spending cuts could aggravate the situation.

"Given that this is not probably just going to be a one-year wonder, it is not appropriate to mount a fiscal stimulus package that is just going to make the deficit worse," he said.

"Similarly, I think it would be economically harmful to react in a panic mode and try to eliminate a $10 billion deficit at the time when the economy is going to be hitting its weakest point."

[drewski]

frankly, its hard to trust the books given Harper's Finance Minister, Jim Flaherty managed to hide a $5.6 billion deficit in Ontario

[jdobbin]

A deficit is probably a good plan right now as long as it's reasonable. As long as we're not running Trudeau/Mulroney sized ones then the long term impact of running a deficit would be negligible but the short term benefits would be tremendous.

Harper said his government would not run a deficit. He derided all the parties as taking the country into deficit. The onus is on him not to produce the deficit his government said would never happen. It is as simple as that.

So far there has been no indication of Harper reducing spending in a meaningful way. He had some good years where he could have held the line but chose not to.

[jdobbin]

Oh, indeed, M.Dancer: you never, ever resort to personal attacks, do you...?

The comment reminds me of a previous poster long since banned who also used the passive aggressive approach. He seemed to not be able to take being ignored either.

[White Doors]

The comment reminds me of a previous poster long since banned who also used the passive aggressive approach. He seemed to not be able to take being ignored either.

And you seem to have a hard time 'ignoring' him. I'd suggest that you make up your mind and stop taking threads off topic.

Thank you

[jdobbin]

And you seem to have a hard time 'ignoring' him. I'd suggest that you make up your mind and stop taking threads off topic.

Thank you

Ditto.

[White Doors]

Ditto.

You're welcome

[Mr.Canada]

Well this is the catch. If Mr. Harper has to cut programs and money in order to have a balanced budget many would be lambasting him for that.

If the PM were to spend on social programs and run a deficit many would scream about that as well.

Basically anything that the PM does either way will be not good enough because the is a member of the CPC and not a Liberal.

We cannot have it both ways.

[Moonbox]

Harper said his government would not run a deficit. He derided all the parties as taking the country into deficit. The onus is on him not to produce the deficit his government said would never happen. It is as simple as that.

So far there has been no indication of Harper reducing spending in a meaningful way. He had some good years where he could have held the line but chose not to.

You act as if it is somehow shocking that a politician would make promises that he doesn't/couldn't keep.

"...but Harper said!" is not a good argument against what is generally considered the wisest course of action by economists. Your esteemed Don Drummond indicated a deficit is probably the best and an unavoidable course of action. The economy has been slowing for over a year now. Increased spending, like I said, is GOOD policy, as long as a surplus in a good year would more or less erase a deficit in a bad year. It's called stablization policy, and every economist worth a lick advocates for smoothing short term shocks to the economy.

Your consistent and repeated declarations that Harper is bad because he breaks his election promises is noted. We are filing it along with the broken promises of every PM we've ever had.

Harper is a politician. Thus far, I'm finding his decisions to be entirely pragmatic and mostly beneficial to me. That's how I vote. I prefer to leave emotion out of the equation because it generally makes fewer good decisions.

Edited October 16, 2008 by Moonbox

[WIP]

So just like every other snap election called by a minority government, we finally have the reason why Harper wanted to get an election out of the way before the public realized how bad things are!

Tories face $10B deficit, report suggests `Fiscal hole' from credit crisis may result in higher taxes, spending cuts next year, Merrill Lynch warns

Aren't you Tories glad now that elected the guy who will bring us spending cuts combined with tax increases? Tory times are once again hard times!

[cybercoma]

I think the more disturbing fact about this article is that governments around the world are taking ownership of the banking and insurance institutions. My wife was saying a couple weeks ago how it's a good thing our economy isn't in as bad a shape as the US. I told her it will be interesting to see how our government convinces us that it needs a stake in the banking business here with a relatively stronger institutions. The government is telling us it needs to buy in so our banks can remain competitive, that looks like the way it is being sold to us. Perhaps I'm being a little too conspiracy theory-esque, but is no one else concerned that all of our finances, especially mortgages which own our properties, are going to be primarily controlled by the Group of 7? Maybe it's a good thing, I honestly don't know enough about economics and would love to be enlightened on the situation by someone in the know. Can someone explain why all of this is necessary? And what it means going forward?

[eyeball]

Tory times are once again hard times!

You gotta love it when a plan works.

[Moonbox]

I think the more disturbing fact about this article is that governments around the world are taking ownership of the banking and insurance institutions. My wife was saying a couple weeks ago how it's a good thing our economy isn't in as bad a shape as the US. I told her it will be interesting to see how our government convinces us that it needs a stake in the banking business here with a relatively stronger institutions. The government is telling us it needs to buy in so our banks can remain competitive, that looks like the way it is being sold to us. Perhaps I'm being a little too conspiracy theory-esque, but is no one else concerned that all of our finances, especially mortgages which own our properties, are going to be primarily controlled by the Group of 7? Maybe it's a good thing, I honestly don't know enough about economics and would love to be enlightened on the situation by someone in the know. Can someone explain why all of this is necessary? And what it means going forward?

The government isn't buying our banks at all. They're buying specific investments the banks hold and giving the banks cash for it. That equates to 0% new government control over the industry.

[OddSox]

The government isn't buying our banks at all. They're buying specific investments the banks hold and giving the banks cash for it. That equates to 0% new government control over the industry.

Even in banking, cash flow is king.