Federal government will run a $34-billion deficit in 2009?

[Chris in KW]

"The federal government will run a $34-billion deficit in the coming fiscal year, and a $30-billion deficit in the following year, a senior government official said."

http://www.cbc.ca/canada/story/2009/01/22/...ok.html?ref=rss

Now, the solution is for our nation to go even further into debt? I'm a liberal (usually). I believe in government spending (to a point). So we have two options:

Lower taxes (and lower spending). Or leave taxes higher (and keep spending higher).

BUT WE CAN'T DO BOTH!

This is NOT a Liberal/Conservative issue. Trudeau and Mulroney (and others) all got us into this debt mess.

If we want to spend a lot, fine. If our leaders decide we need to spend an extra 10 billion to stimulate the economy, that's fine. But don't pretend that just because we're in recession, that we can go back to playing the "we'll pay for it later" game. That doesn't work in your personal finances, and it doesn't work for the country.

This is a simple matter of accounting. Let's commit to doing what we can pay for. If it's worth doing, it's worth paying for (and raising taxes for). If it's not worth raising taxes for, it's not worth doing.

[BubberMiley]

That GST cut looks more and more irresponsible every day.

[ThatGuy]

http://www.ctv.ca/servlet/ArticleNews/stor...?hub=TopStories

I mean, talk about policy reversal.

Where are all your Conservatives that lapped up the misinformation about "techinical" deficits?

Cut taxes, cut programs, and don't pay down the debt. Awesome leadership.

[Molly]

I tend to agree... either/or, but not both.... but let's give it that couple more days, to find out where they plan to find the money coming in and where they plan to spend it. That's a lot more meaningful than just 'how much'.

I'll be pretty choked if it's manipulated to look smaller through sale of assets; if it isn't going to be spent at home; if it's primarily based in inappropriate tax cuts; if it's too 'trickle down' in mindset; or if it's bizarrely optimistic-- but we shall see soon enough.

[85RZ500]

I'm not a big fan of handouts to corporations that have been so thoroughly mismanaged, or to those in the public trough.

But a few short weeks ago everybody had their hand out and the opposition and province's said stimulate!, stimulate!, stimulate!.

So now, here's the plan. Don't like it? call an election, bring it on.

[Mr.Canada]

You guys are being melodramatic, give me a break. This current world economic hardship will start to turn up by fall of 2009. With every western nation going into deficit there is massive worldwide stimulus going on right now. You guys seem to think that the national economy works like a big bank account, but it doesn't work that way.

[85RZ500]

Mr.C, just watched the BofC guru in the news. "`08 will be tough but `09 will see a turnaround".

Ah, there's a flaw. The high cost of fuel and it's ripple effect is a large part of the

reason for today's economic woes. The masses have less disposable income to play with, their purchasing power is diminished. The economy slows down.

All we need is for the brokers/investors/speculators to start playing their games again and the status quo will remain.

Edited January 23, 2009 by 85RZ500

[Chris in KW]

You guys are being melodramatic, give me a break. This current world economic hardship will start to turn up by fall of 2009. With every western nation going into deficit there is massive worldwide stimulus going on right now. You guys seem to think that the national economy works like a big bank account, but it doesn't work that way.

Please back up your statement: In what way is the national debt NOT like a bank account? Because these loans don't really have to be paid back? Because we don't have to pay interest on them? Both false.

In many important ways, the national budget is exactly like your household budget. When you borrow money now, you have to pay it back later. That means next year you have less money for all the stuff you normally need to pay for. Why? Because you're still paying off your overspending from last year.

Massive deficit like this cripples our ability to do future fiscally responsible budgeting. I know, it seems easy to let future governments deal with it. But that's not responsible.

There is one big reason that (I think) is causing this stupid rush into deficit: If the US is doing huge "stimulus spending", our government can't be seen to be doing less.

So in answer to your statement "every other western nation is doing it", well... yes. And for the biggest example (the US), this is just a continuation of disastrous economic policy.

Sometimes "everyone else is doing it" is NOT a good reason to do something.

[Moonbox]

Do you understand how the economy works by any chance?

[punked]

Do you understand how the economy works by any chance?

Ummmmmm no one really does so please don't claim you do.

[Chris in KW]

Do you understand how the economy works by any chance?

I'd love to see some actual debate on this topic, not just sarcastic comments. This is a HUGE deficit being proposed. It undoes a large portion of the financial progress our country has made in the last 11 years.

Yes, we're in a recession. However, I think we're slightly better off than the US for two reasons:

1. Our banks have not allowed us (as consumers) to get into stupid mortgages as much as US banks did.

2. Our government has not gone into insane debt over the last 10 years.

Canada should be proud of our fiscal policy over the last 10 years and more. Though our debt is way too large, we have at least been going in the right direction. I don't think we understand the HUGE economic advantage of paying down our debt. It's not glamorous, it's not instant gratification. But it's real money!

What does 64 Billion dollars of debt cost us at 3% annual interest? ALMOST 2 BILLION DOLLARS PER YEAR!

(I picked 3% as an arbitrary number - I have no idea what we're paying on our national debt on average).

So - go ahead and spend, if it's really necessary. But STOP PLAYING THE DEFICIT GAME!

[Moonbox]

Ummmmmm no one really does so please don't claim you do.

Actually my knowledge of economics is extremely good.

I work in the industry, I went to school for it, I anticipated the market crash and made money off of it.

What do you want to know about?

Do you want to know how the sub-prime mortgage crisis occured?

Do you know why oil prices were so high in the summer and how both of those combined to crash our economy in Sep/October?

What don't you understand?

[85RZ500]

More news today re the content of the budget that's to be tabled Tuesday. Ignatief and co' are upset how the news is being handed out. He was just speaking to the Canadian Club , rattling the coalition sabre and dissing the proposed deficit.

But what really galls me is the way he talks about this country, "his country". If he loves it so much, why did he spend most of his working life out of it.

Not good enough to live and work in, but just dandy to drop in to a 6-figure retirement package in politics, the Canadian of Convenience.

Now Harper has been saying that the budget is just what the Liberals asked for. Ignatief is saying the opposite, big time.

I see a setup in the works, and possibly a coalition led by three people from decidedly different planets.

Edited January 23, 2009 by 85RZ500

[Chris in KW]

Now Harper has been saying that the budget is just what the Liberals asked for. Ignatief is saying the opposite, big time.

Ok, I'm (usually) a liberal. But I'm willing to give Harper credit if he deals with this economic crisis effectively.

However, he's not. He's doing half of what the Liberals want - the spending half.

However, what he's doing wrong is ignoring the fact that spending HAS TO BE FUNDED. If you spend more, tax more. This is simple math.

You can't pretend to be a good Conservative just because you keep taxes low.

Overspending and lowering taxes, at the same time, just means you're bad at math.

[Molly]

"I see a setup in the works..."

More gamesmanship, instead of leadership. More partisanship, instead of patriotism. I agree with that observation, but I don't share your apparent approval.

[Mr.Canada]

What does 64 Billion dollars of debt cost us at 3% annual interest? ALMOST 2 BILLION DOLLARS PER YEAR!

(I picked 3% as an arbitrary number - I have no idea what we're paying on our national debt on average).

So - go ahead and spend, if it's really necessary. But STOP PLAYING THE DEFICIT GAME!

You've just demonstrated exactly how the economy doesn't work, a popular misconception. It isn't like a big bank account with billions of dollars in there, it just doesn't work that way, which you've failed to realize.

[normanchateau]

But what really galls me is the way he talks about this country, "his country". If he loves it so much, why did he spend most of his working life out of it.

Rumor has it that he was courted by the best universities in the world. Of course if he'd stayed in Canada, you'd be singing his praises right now.

[capricorn]

Rumor has it that he was courted by the best universities in the world.

Rumors are a great source of credible information.

Of course if he'd stayed in Canada, you'd be singing his praises right now.

If he'd stayed in Canada, maybe he would have spared us the whole sordid Dion experience. Heck, he might even be Prime Minister today. After all, he did place second in the leadership race behind the doofus.

[August1991]

So much nonsense, so little time.

I'd love to see some actual debate on this topic, not just sarcastic comments. This is a HUGE deficit being proposed. It undoes a large portion of the financial progress our country has made in the last 11 years....

What does 64 Billion dollars of debt cost us at 3% annual interest? ALMOST 2 BILLION DOLLARS PER YEAR!

In fact, the federal government borrows now at about 2%. That's far better than anyone posting here so if it were just a question of personal finance, we would all be better to let the federal government do our borrowing on our behalf.

I mean, does it make sense to tax me and pay back a federal debt at 2% or leave me the money so I can pay down my mortgage at 4.5%?

[but you see, it's not a question of personal finance. If the government were run as a business, it would encourage people to smoke since smokers typically die around the age of 65. Imagine. smokers pay into a pension scheme their whole life and then never make a claim.]

-----

Paying down a debt is good advice for a person or a business. It is bad advice for a country or a government.

Unless we have discovered a way to borrow from Martians, the world by definition is not in debt. Some individuals of course are in debt and others have net savings. Overall, the world has a positive net wealth. In Canada, this is very large and includes the physical capital of Canada and most particularly the talents, skills and abilities of Canadians.

In summary, we should be far more concerned about what the federal government buys and how it intervenes to direct us in our activities. These matter far more than the budget deficit or the "federal debt".

Edited January 24, 2009 by August1991

[Oleg Bach]

National debt can never be fully paid off - it's just a big tribute payment to the tough guys on top of the mud heap. Deficit spending by government is essentially the borrowing of money from the pubic so government can function ---it's a sign of very poor management...on governments part...and a sign of the stupidiy of the people who as far as the bail out factor is concerned - It's giving money to rich people who are to stupid to make their own...and off we go..

[KeyStone]

Well, I certainly agree with you that tax cuts are not needed.

However, there are times when it makes sense to run a deficit, and this is one of those times.

This is an economic crisis, the proportion of which we haven't seen since 1929.

Jobs will be lost. Homes will be repossessed and industries will be destroyed.

While this is unavoidable, there is much that can be done to minimize the damage.

Unfortunately, there are two problems.

1) Thanks to globalization and the flow of capital through porous borders, Canada can do little to boost its own economy.

The US injection will do more to spur our economy than the Canadian spending spree.

2) Neither the Conservatives, the Liberals, or any of the other parties have the first freaking clue about how to stimulate the economy.

It seems that they have agreed that spending is good, and now they are figuring out which special interests groups they want to appease the most.

[madmax]

Keystone has provided a very good and short analysis.

I like the 2 point summary.

While the comments are on solid ground, it doesn't mean I have to agree with them.

1) The CPC are already running a deficit. Tax cuts could further increase the deficit. I see no value in handing off double digit billion $ deficits for an unknown period. Particularly if you state that the Canadian Spending can't influence the economy to any substantial degree, unlike a US stimulus pkg. Thus, I believe the CPC should get the deficit under control. They have proven weak in the financial governance of this country, and they are heading us deeper into long term deficits. The CPC are going to be handing out money like its candy. And I agree with you, they don't have a clue how to stimulate an economy, because they never realized the economy was in trouble in the first place.

2) My view is the let the US continue to run the Right Wing deficit spending of the Bush era, including there massive stimulus plan, because they will control their borders in the Global economy. When it is time to protect industry and jobs, they can and will do it. The CPC spending will not protect any jobs, or industries, anymore then their tax cuts protect jobs and industry.

You need an industrial policy before any of those measures will work. Thus tax cuts or stimulus could work, but only with a plan.

Having just read some of the nonsense recently released regarding the budget, I see alot of money being set aside for smoke and mirror programs to pretend they are doing something.

We are going to watch Billions of dollars get flushed down the toilet.

[madmax]

Actually my knowledge of economics is extremely good.

I work in the industry, I went to school for it, I anticipated the market crash and made money off of it.

Sure you did......

[Moonbox]

How is someone even supposed to respond to that? It's something I can't prove to you and you can't disprove.

It was as easy as, "Why the f*** is oil trading at $140 a barrell all of the sudden? I'll cash out now thanks.

I'm deeply sorry you floundered in the market but the sub prime mortgage crisis began in 2007 and a lot of people watched in wonder when, despite how bad things looked going forward, a lot of stuff was trading at record highs.

Believe me, people made FORTUNES over the last few months short selling and exercising options. I don't expect you to have the slightest clue what I'm talking about though so I probably shouldn't even bother.

[tango]

Believe me, people made FORTUNES over the last few months short selling and exercising options.

Exactly. You have confirmed that the 'free market' is currently constituted as a tool for the rich to steal from the rest, and leave them without jobs, houses or cars as well. Nothing to brag about really, imo.