Austere budget in cards

[capricorn]

Jim Flaherty appears to be preparing a tough budget designed to take Canada on path to reducing the massive deficit.

To make a dent in the ballooning deficit -- currently pegged around $56 billion -- Flaherty said there will be no new spending announcements in the budget and there will more likely be spending cuts. How deep those cuts might be will depend on the growth of the Canadian economy.

"If we have sufficient economic growth, we won't have to do as much," he said. "But if we don't have as much economic growth, we'll have to restrain the rate of growth of spending ... Inevitably, there will be some government programs that will come to an end. Just because a program is created by a government doesn't mean it goes on forever."

Program spending accounts for about $100 billion and is growing at a rate of just over three per cent, Flaherty said.

Despite the austere talk, the finance minister said some areas will be protected from cuts. Ottawa won't reduce transfers to the provinces or spending commitments made to pensioners or the disabled, he said.

"Those types of benefits that are direct transfers from the government of Canada to individual people in Canada," he said. "We're not going to touch either of those areas . . . But we still have that large piece of spending, which is program spending, that we can address."

http://www.ctv.ca/servlet/ArticleNews/story/CTVNews/20100111/economy_flaherty_100111/20100111?hub=QPeriod

No doubt we'll be hearing from the financial experts about the imprudence of cutting government expenditures when the unemployment picture is still unfolding following the injection of stimulus funds into the economy. As an ordinary onlooker and taxpayer, it seems to me that finding savings in $100B of spending is necessary and not unrealistic.

[eyeball]

No doubt we'll be hearing from the financial experts about the imprudence of cutting government expenditures when the unemployment picture is still unfolding.

No doubt Jim Flaherty will also be hearing from political experts that cutting spending while in a minority position will be even more imprudent.

[capricorn]

No doubt we'll be hearing from pundits how Harper is engineering his own defeat.

[eyeball]

I can see him engineering this on other issues but an election strategy based on making deeper spending cuts than the other parties seems unlikely.

[fellowtraveller]

Heard a rumour today about other measures that may be taken via CMHC to slow the growing prices in real estate..... no more 5% down allowed, 10% will be the minimum. The other was a further restriction on permissible amortizations to 30 years.

Either will put the boots to first time buywers and slow the market, 10% minimum down payment will be a very major blow both for resale and new housing, so I dopn't know if that is feasible or will actually happen.

[eyeball]

Heard a rumour today about other measures that may be taken via CMHC to slow the growing prices in real estate..... no more 5% down allowed, 10% will be the minimum. The other was a further restriction on permissible amortizations to 30 years.

Either will put the boots to first time buywers and slow the market, 10% minimum down payment will be a very major blow both for resale and new housing, so I dopn't know if that is feasible or will actually happen.

Its probably feasible but not likely during an election campaign or a Parliament that is in a twilight zone of perpetual readiness for one.

[GrizzlyBear]

Austerity is just what this country, and unsustainable economic system, needs. Here's hoping the first round of cuts are just the beginning. I hope Flaherty realizes that in the long run, if he hopes to be part of a real solution, he'll have to table a budget that makes deep cuts in pensions, and EI.

[Jerry J. Fortin]

Austerity is just what this country, and unsustainable economic system, needs. Here's hoping the first round of cuts are just the beginning. I hope Flaherty realizes that in the long run, if he hopes to be part of a real solution, he'll have to table a budget that makes deep cuts in pensions, and EI.

Deep cuts are indeed what needs to happen, but cutting programs and services will not be acceptable to the citizens. The current slate of politicians have no answers to this problem, but some folks do. Some folks know how to shrink the budget and increase revenues at the same time.

[capricorn]

Deep cuts are indeed what needs to happen, but cutting programs and services will not be acceptable to the citizens.

Predictably, reaction will depend on how the program that is cut affects them personally. The National Post thinks a tough love budget would be acceptable to the general public.

The Minister's hands are partially tied by a series of commitments that can't be broken -- including defence spending and transfer payments to the provinces -- but given the explosive rate of spending growth under a supposedly fiscally conservative government, we're sure that there are vote-buying programs a-plenty that could be sacrificed on the altar of sound fiscal stewardship.

---

As successive Liberal majorities in the 1990s proved, Canadians are quick to forgive governments for difficult cuts that ultimately promote the country's long-term fiscal health.

http://www.nationalpost.com/opinion/story.html?id=2434722

I haven't seen any comments by the the PBO about program cuts as a means of fighting the deficit. I hope his report addresses this touchy subject.