Flaherty lays out his vision

[Higgly]

Jim Flaherty just finished delivering his vision for the economic future of Canada. Basically he is promising to pay down the debt and dedicate all of the savings from having done so to tax cuts for Canadians. He also said that surpluses are going to be even greater than he thought, which leaves a lot of folks out west wondering why he had to clobber income trusts.

It will be fun to hear what the provinces have to say, since they are still struggling with the fiscal imbalance. Quebec has been particularly vocal about what downloading has done to them (as has Ontario). I wonder if they will be happy at having Harper refer to them as a nation in a speech.

[blueblood]

What's paying off the debt going to do? that money would be better off being invested in the economy

[Higgly]

I think it's a good idea to do that and, in fact, the Liberals were doing it for almost a decade before the Tories came into power. John McCallum, Liberal Finance critic (and once chief economist at one of the big banks) said "What's new? We've been doing that for years!"

In any case, paying down the debt means the country will be paying out less in interest on debt instruments (e.g bonds) to debt holders, many of whom are foreign, and keeping that money in the economy.

[Topaz]

I'm just wondering how the Cons are going to do this when there's alot of unknowns that can happen with any budget. They don't know exactly how much is war is going to cost and how long it will go on, what about down turns in the economy. IF they can do it, more power to them, but look at what Flaherty did to Ontario, left it with a 6 billion debt and he wants all the provinces to break even so his idea will work!! They kkep saying what they have done for Canadians so far in their last budget. For me, the GST is the only benefit I see and I'm middle-class income.

[normanchateau]

They keep saying what they have done for Canadians so far in their last budget.

But they conveniently forget to mention that they raised the income tax rate on the first $35-36,000 of taxable income from 15% to 16%. I suppose their reason is so that they can get credit when they lower it next time.

[Higgly]

But they conveniently forget to mention that they raised the income tax rate on the first $35-36,000 of taxable income from 15% to 16%. I suppose their reason is so that they can get credit when they lower it next time.

Bingo. Good point.

[Higgly]

I'm just wondering how the Cons are going to do this when there's alot of unknowns that can happen with any budget. They don't know exactly how much is war is going to cost and how long it will go on, what about down turns in the economy. IF they can do it, more power to them, but look at what Flaherty did to Ontario, left it with a 6 billion debt and he wants all the provinces to break even so his idea will work!! They kkep saying what they have done for Canadians so far in their last budget. For me, the GST is the only benefit I see and I'm middle-class income.

Yes, as Patricia Croft, Chief Economist for Philips, Hager and North (mutual funds) has pointed out, the Americans once said they were going to eliminate debt as well but then their economy went into recession.

And I agree with you about Flaherty too. He did do that - and he covered it up by telling Ontarians that the budget was balanced! What a liar.

[geoffrey]

He raised our taxes, both on trusts and personal taxes. Income tax revenue skyrocketed 10% this year.

His vision is very murky, if 1) he believes he's a conservative, because he's not... and 2) he thinks that Canada can remain competitive internationally with a far more complex, regressive and outdated system of taxation.

[jdobbin]

He raised our taxes, both on trusts and personal taxes. Income tax revenue skyrocketed 10% this year.

His vision is very murky, if 1) he believes he's a conservative, because he's not... and 2) he thinks that Canada can remain competitive internationally with a far more complex, regressive and outdated system of taxation.

Flaherty's numbers don't make much sense.

http://ca.news.yahoo.com/s/capress/061123/...update_net_debt

[August1991]

Thanks for the link, Dobbin.

Finance Minister Jim Flaherty's promise that the federal government will pay off Canada's "net debt" by 2021 raised eyebrows on Thursday after some early interpretations that the Conservatives would wipe out $480 billion of red ink in 15 years.

Net debt involves a calculation that piles up all government debt - federal and provincial - then subtracts government assets, including the Quebec and Canadian pension plans. It's far less than the total federal debt - the latest unofficial estimate pegs it at less than $300 billion - and can change quickly because most provinces are running surpluses these days.

This is arbitrary madness. Flaherty is raising "live within your means" to an economic principle. The last time politicians used a homespun homily ("sound money") as a guiding economic principle (fetish), we got the Great Depression.

First, government debt is nothing like a family's debt for the simple reason that governments spend other people's money. No family can do that.

Second, Canada (and logically Canadian governments) will always be in debt. The federal government's debt should be sufficiently large that Canadian capital markets have the right liquidity and benchmark rates to support private financial paper. The government should run a deficit to add paper to these markets. In short, the federal government should not necessarily pay down the debt.

Third, the important question is government spending. If Flaherty is spending money like a drunk sailor, who cares if he's balancing the budget or even running a surplus?

If Bill Gates goes on a bender and blows a billion or two on slow horses and fast women, he won't be borrowing either. Does that make the spending acceptable?

[geoffrey]

He raised our taxes, both on trusts and personal taxes. Income tax revenue skyrocketed 10% this year.

His vision is very murky, if 1) he believes he's a conservative, because he's not... and 2) he thinks that Canada can remain competitive internationally with a far more complex, regressive and outdated system of taxation.

Flaherty's numbers don't make much sense.

http://ca.news.yahoo.com/s/capress/061123/...update_net_debt

He's also digging himself a hole. What happens when Alberta's economy slows, when natural resource prices decrease?? The Bank of Canada is talking about an interest rate cut to spur the struggling East, that cut will hurt Alberta further and push us one step closer to economic hardship from a horrendous labour and space shortage.

The economy isn't as bright as it looks.

http://www.canada.com/topics/finance/story...fdf8&k=9870

Good article there. Without Alberta's (specifically Calgary's) house price increases, the economy is growing much slower than ideally. Cut out Alberta's contributions all together and the economy is stagnant. This isn't the time to be paying down debt or celebrating economic success.

This is the time to chop taxes and renovate our system to attract investment. Canada is perched on the verge of becoming a second class economy, if we aren't there already.

This should be a recession or even depression budget, not a celebration of surplus. The only economic brightspot in Canada is Alberta, and that's a very risky venture to bet 15 years ahead on.

[jdobbin]

This is arbitrary madness. Flaherty is raising "live within your means" to an economic principle. The last time politicians used a homespun homily ("sound money") as a guiding economic principle (fetish), we got the Great Depression.

I am still trying to make sense of all the policy balloons the Finance minister is putting out. I looked at the income splitting proposal and ultimately it might not be as good for me as a general income tax cut. I think the splitting could be expensive and how is it good for single people or widowed people. They'd benefit more from a general income tax cut, I'd think.

I'd like some clarity from the Finance minister. This plan of Flaherty's doesn't make a lot of sense to me at all. I have no idea what direction the government is taking and whether it will lead to a deficit or lower or higher taxes for me.

[jdobbin]

He's also digging himself a hole. What happens when Alberta's economy slows, when natural resource prices decrease?? The Bank of Canada is talking about an interest rate cut to spur the struggling East, that cut will hurt Alberta further and push us one step closer to economic hardship from a horrendous labour and space shortage.

The economy isn't as bright as it looks.

http://www.canada.com/topics/finance/story...fdf8&k=9870

Good article there. Without Alberta's (specifically Calgary's) house price increases, the economy is growing much slower than ideally. Cut out Alberta's contributions all together and the economy is stagnant. This isn't the time to be paying down debt or celebrating economic success.

This is the time to chop taxes and renovate our system to attract investment. Canada is perched on the verge of becoming a second class economy, if we aren't there already.

This should be a recession or even depression budget, not a celebration of surplus. The only economic brightspot in Canada is Alberta, and that's a very risky venture to bet 15 years ahead on.

I saw the news on Calgary's house prices.

I think we will know what is happening in Canada overall following Christmas.

I don't think I like Flaherty much as Finance minister. He makes me very uncertain about how I should invest my money and whether I am going to pay more or less tax and whether the government is about to go into deficit because he miscalculated.

[geoffrey]

I don't think I like Flaherty much has Finance minister. He makes me very uncertain about how I should invest my money and whether I am going to pay more or less tax and whether the government is about to go into deficit because he miscalculated.

I couldn't agree more. The biggest hit to foreign investment comes from a government that is very unclear on their objectives and policy. The big lie on trusts was devastating to confidence from foreign investors, lots of our foreign investment was in these units.

Creating more uncertainty will only hurt our economy further.

I'm tempted to re-elect the Liberals before these inexperienced hooligans tank our economy completely. I have not been impressed with a single peice of legislation from the CPC in economics or finance yet, besides the GST tax cut. Everything else has been smoke and mirrors and creating confusion about the future.

Flaterty is an incompetent Finance minister and his indecisiveness (or rather, random decisiveness) will hurt us in the area that we need the most improvement... investment.

[Charles Anthony]

I'm tempted to re-elect the Liberals before

I recommend we call an exorcist. NOW!

[geoffrey]

I'm tempted to re-elect the Liberals before

I recommend we call an exorcist. NOW!

My point is valid. I'll take market certainty anyday. Until the NDP budget, the Liberals provided that.

[jdobbin]

Flaterty is an incompetent Finance minister and his indecisiveness (or rather, random decisiveness) will hurt us in the area that we need the most improvement... investment.

I hope the Liberals think long and hard about what sort of economic platform they will run an election on. It could be what decides the next election.

[geoffrey]

Flaterty is an incompetent Finance minister and his indecisiveness (or rather, random decisiveness) will hurt us in the area that we need the most improvement... investment.

I hope the Liberals think long and hard about what sort of economic platform they will run an election on. It could be what decides the next election.

Hence my belief that Kennedy has a larger chance at both winning the leadership (if Liberals aren't naive) and an election. He's the only candidate with a focus on economic reform and competitiveness.

I will vote for the party that offers the best economic package... I did in the previous election and this is what I got? Hmm....

The Liberals at least have a track record of success during my remembered lifetime (I was mighty young during Mulroney). The CPC has just proven to be a big disappointment in the area that I thought they had the greatest potential.

[Riverwind]

The Liberals at least have a track record of success during my remembered lifetime (I was mighty young during Mulroney). The CPC has just proven to be a big disappointment in the area that I thought they had the greatest potential.

I think it is too soon to write off the CPC. They followed through on their GST promise. They had the guts to make the right decision on trusts even though it was going to upset their base. And they are focusing on paying down debt and reducing taxes in the long run instead of inventing new grandiose programs costing billions like national daycare. Even if Kennedy got in he would be forced to move on all sorts of 'initiatives' that require billions.

[geoffrey]

The Liberals at least have a track record of success during my remembered lifetime (I was mighty young during Mulroney). The CPC has just proven to be a big disappointment in the area that I thought they had the greatest potential.

I think it is too soon to write off the CPC. They followed through on their GST promise. They had the guts to make the right decision on trusts even though it was going to upset their base. And they are focusing on paying down debt and reducing taxes in the long run instead of inventing new grandiose programs costing billions like national daycare. Even if Kennedy got in he would be forced to move on all sorts of 'initiatives' that require billions.

True, but all these tax plans are simply social intitives too. There is no base cut in taxation... in fact, only an increase since the CPC got in.

Targetted tax cuts are really just welfare in disguise. Everyone needs less tax.

[Riverwind]

True, but all these tax plans are simply social intitives too. There is no base cut in taxation... in fact, only an increase since the CPC got in.

The personal exemption went up (i.e. a tax cut) and the GST went down. Both are expensive promises because the affect everyone.

[geoffrey]

True, but all these tax plans are simply social intitives too. There is no base cut in taxation... in fact, only an increase since the CPC got in.

The personal exemption went up (i.e. a tax cut) and the GST went down. Both are expensive promises because the affect everyone.

The exemption was countered by the increase in the base rate.

Like I said, I supported the GST cut.

Income tax revenues are up 10% this year. Is Jim going to cut them by 8% for us next year (10-inflation)??? Unlikely.

So the government is taking more of our money... spending more of our money. Why not just elect Liberals? We get the same result but a balanced investment climate as well.

[hiti]

Steve and Jim DECREASED the personal exemption by $400 as they raised the lowest tax rate and the capital gains rate while lowering a user tax (GST) by 1% which does not benefit the poorest who spend most of their income on non taxable food, rent or mortgage payments, etc.

I was very disappointed in the flim-flam of Jim's economic update. His paying off the "net" debt is a sham since it depends on 9 provinces, 1 nation and 3 territories but mostly Alberta.

Does Jim and Steve really think that all Canadians are stupid? I found a really good summary here: http://whigca.blogspot.com/2006/11/economic-update.html

[August1991]

Like I said, I supported the GST cut.

Income tax revenues are up 10% this year. Is Jim going to cut them by 8% for us next year (10-inflation)??? Unlikely.

So the government is taking more of our money... spending more of our money. Why not just elect Liberals? We get the same result but a balanced investment climate as well.

Geoff, you're right.

Flaherty should cut taxes and let individual Canadians decide whether to pay down the debt. If someone wants to pay the government debt, they can buy government bonds with their tax refund and pay back the debt. Others can decide to spend the money differently.

Why should Flaherty decide for all Canadians? We live in a democracy. Flaherty should give individuals the money and let them decide to buy Canada Savings Bonds, pay the debt, or not.

[Higgly]

Why should Flaherty decide for all Canadians? We live in a democracy. Flaherty should give individuals the money and let them decide to buy Canada Savings Bonds, pay the debt, or not.

Yeah, that'll work.

The news this morning is that the US yield curve is inverting pretty badly now, with the 2 year bond yield moving significantly higher than the 10 year. This has been a reliable indicator of impending recession in the past so Flaherty's plans could be nothing more than wishful thinking.