Jim Flaherty at the Fraser Institute

Last night, supporters of the Fraser Institute gathered in the Adam hall of the Chateau Laurier to listen to federal finance minister Jim Flaherty deliver an assessment of the Canadian and global economies. On Thursday, the minister will be delivering a sobering fall economic update in the House of Commons and last night, we got a hint of what might be to come.

Flaherty was introduced by former Ontario PC Premier Mike Harris, the finance minister’s former boss and mentor. Harris disappointed the crowd saying that he was not about to return to politics but that a deep-rooted fixation on Canada’s future prosperity is one that both he and Preston Manning hold. Manning and Harris are the authors of Canada: Strong & Free, a six-volume set of books describing Canada’s ideal path along internationalism, economic freedom, federalism, and education among other topics. Last night’s dinner was held to mark the release of their sixth summary volume called Vision.

In minister Flaherty’s speech, he described Canada’s position in a rapid yet sustained decline of the global economy and while trumpeting Canada’s economic leadership among G7 nations, we are simply the country that is sinking the slowest. Indeed, at a recent meeting of the G20 finance ministers, Mr. Flaherty revealed that not one minister was optimistic about their economies domestic or international. Flaherty will project a surplus through the end of this fiscal year ending April 2009, however, as he conceded the next fiscal year will present “a challenge”. The minister sketched a fiscal portrait in broad strokes declaring that the crisis will not end tomorrow, next week or in the next few months and warned that we have not yet seen the worst of the situation.

Yet despite its faltering position, Canada is an economic leader among its economic peers. Flaherty described the economic measures implemented by the federal government to prepare for such an eventuality saying that they’d never apologize or regret cutting the taxes of Canadians or bringing in more stringent regulatory frameworks to maintain Canada’s economic structure. Indeed, the IMF, as Flaherty noted declared Canada to be the best economic shape going into the global economic downturn.

In the United States, President-elect Barack Obama has conceded that he will delay the rollback of the Bush tax-cuts and in Canada, Flaherty suggests that this Conservative government will maintain Canadian tax-cuts to retain this increased spending power among Canadian consumers.

Perhaps the worst-kept secret in Ottawa is that this government will project a deficit in the near future. Flaherty has declared that he will sing from the same songsheet as other national government and use the federal treasury to stimulate growth, or rather stem the “negative growth”. For this, infrastructure minister John Baird will become a hero of sorts in Ontario as federal dollars are channeled through on road, rail and other contruction projects sustaining jobs. Prime Minister Harper days earlier declared that some deficits provide opportunity and are necessary. Flaherty promised that the stimulus would be underway by March 2009. The pairing of the temporary and artificial sustenance of Canadian jobs via government spending with the consumer spending power of a less-tax-burdened population may help the good ship Canada weather the global economic storm until it subsides. Or at least the theory goes.

Deficit spending will be accomplished in order to sustain the “real” economy. Flaherty promised no ‘structural’ deficit.

For my part I asked the minister during the dinner about conservative opportunity describing this as a time when Conservatives in power could be allowed to make cuts to government spending and suggested that a reduction in the size of government rather than its growth would help balance the books in a real rather than artificial way. The finance minister unfortunately balked at the question suggesting that some areas of growth are necessary such as the rescue of the state of the armed forces. If given a follow-up, I would have suggested that some cuts are necessary too. Even in a recession, the government is a growth industry. The minister described a treasury board review of all programs to measure value for money and promised to extend this review through both core and non-core assets.

As for the public sector, wages will not increase faster than the private sector. This has caused some concern among public sector employees and the minister reached a deal with PSAC, it’s largest union late yesterday. The two parties have settled on a wage increase of 6.8% over the next four years.

On interprovincial trade barriers, the minister promised to break these down and suggested that the current economic climate behooves governments to allow uninhibited trade within Canada. The minister welcomed a cooperative spirit among provincial and territorial ministers on addresses the economic downturn domestically.

The minister declared that the government would not artificially engineer a surplus. Perhaps this is a reflection by the minister on Paul Martin’s method of balancing budgets by slashing transfers to the provinces and “fixing” healthcare for a generation. Ontario has warned Ottawa not to balance its books on the back of the province and what is needed is economic stimulus in the province through reduction of its corporate tax rate. For the part of the Conservative federal government, Flaherty described a $37B debt reduction, a reduction of the tax burden by $200B and a 2012 projected corporate tax rate of 15%.

On securities regulations, the minister promised the creation of a single national securities regulator. The federal government will seek to regulate leverage and large pools of capital. A more transparent market infrastructure is needed according to Mr. Flaherty.

The sum of Flaherty’s speech was to say that this government is acting to sustain economic activity for the foreseeable future as economies around the world reconfigure to recover. Taxes will remain low, spending is temporary and a deficit would be a temporary and an short aberration from Canada’s economic plan.

Comments

comments

  • bec

    Hi Stephen,

    Correction in paragraph 1, Prentice to Flahrety.

    Cheers

  • Josef

    Why isn’t Tasha Kheiriddin Finance Minister?!?

    Sorry, couldn’t help me.

  • MikeW

    Yes Stephen, CPAC settled for 6.8% over 4 years, however it is all the additional goodies negotiated by the Union, increased leaves, days off, and Etc. , the private sector weeps! You neglected to mention the Post Office and their demands or the modest requests of the Ontario Primary School teachers. Your suggestion to slow or better halt the growth of the civil service is what should happen.

  • http://www.stephentaylor.ca Stephen Taylor

    Agreed

  • Catherine Soplet

    Hi,Stephen

    At the November 24 dinner, mine was this 2-part question:

    “Will the federal government help build the knowledge infrastructure required in the 21st Century global knowledge economy by assisting the governance of regional school boards to deliver public education, by:

    1. Rescinding the GST tax paid by school boards. (Note: Hospitals do not pay GST)

    2. Purchasing public school lands with federal funds at market rates as school land inventory comes to market so that funds can generate for one-time balancing of school board budgets.

    This will preserve neighbourhood green space while emerging green technologies develop for possible alternate land use, such as geothermal sites [as opposed to commercial/residential development].

    Answers:
    1. Probably not.
    2. Think about it.

    Backgrounder
    Public education is under assault. Public education underpins democracy. In 2002, PoliSci Chair David Cameron noted in his 2002 report to the Ontario Provincial government positive correslations between levels of education with levels of social engagement (volunteerism) and levels of voter participation in elections.

    Public education founder Egerton Ryerson correctly responded to the waves of immigration, socio-economic disparity and geopolitical shifts in Loyalist Canada with universal public education in 1846. These same tectonic forces are felt today, boosted in pace by digital speed and more complicated because of non-national languages.

    Ryerson's approach, vehemently criticized by the Family Compact, in fact underpinned Ontario and Canada's economic success in the world, until recently, when the quality of delivered public education has trended downwards in an interesting correlation to Ontario's economic performance..

    Because of the impacts of unnegotiated immigration policies upon language fluency and literacy rates in public education, the resource-rich mobile classes are evacuating to private school or French Immersion and other regional specialized programs. This excerbates the rate of socio-economic disparity. Ryerson's approach to universal public education needs reinvigoration today to reverse this trend.

    The impact of unnegotiated and unsupported immigration impacts on public education are impeding upon an even delivery of education curriculum to all students. Regrettably, a multi-tier quality of education is emerging, where access to private schools or ability to reside in promising public school catchments is determined by nothing other than economic resources.

    This tiered approach may miss excellent candidates who could otherwise qualify to participate in the increasing opportunities in our colleges and universities , which institutions Minister Flaherty mentioned in his speech would be part of the Government's vision of the post-crises world. I am reminded of an education forum where, in Grade 9 at Albion Collegiate, an “at risk” youth learned he was a gifted musician because the school program introduced him to a saxophone.

    The sale and commercial/residential redevelopment of school lands will have a negative impact on neighbourhood quality of life and consequently, real estate values. The school lands are being sold to in a one-time desperate, short-term bid to balance budgets at inadequately funded regional school boards.

    Catherine Soplet
    Mississauga, Ontario

  • http://www.stephentaylor.ca Stephen Taylor

    Approve
    Sent from my BlackBerry device on the Rogers Wireless Network

  • Catherine Soplet

    Hi,Stephen

    At the November 24 dinner, mine was this 2-part question:

    “Will the federal government help build the knowledge infrastructure required in the 21st Century global knowledge economy by assisting the governance of regional school boards to deliver public education, by:

    1. Rescinding the GST tax paid by school boards. (Note: Hospitals do not pay GST)

    2. Purchasing public school lands with federal funds at market rates as school land inventory comes to market so that funds can generate for one-time balancing of school board budgets.

    This will preserve neighbourhood green space while emerging green technologies develop for possible alternate land use, such as geothermal sites [as opposed to commercial/residential development].

    Answers:
    1. Probably not.
    2. Think about it.

    Backgrounder
    Public education is under assault. Public education underpins democracy. In 2002, PoliSci Chair David Cameron noted in his 2002 report to the Ontario Provincial government positive correslations between levels of education with levels of social engagement (volunteerism) and levels of voter participation in elections.

    Public education founder Egerton Ryerson correctly responded to the waves of immigration, socio-economic disparity and geopolitical shifts in Loyalist Canada with universal public education in 1846. These same tectonic forces are felt today, boosted in pace by digital speed and more complicated because of non-national languages.

    Ryerson's approach, vehemently criticized by the Family Compact, in fact underpinned Ontario and Canada's economic success in the world, until recently, when the quality of delivered public education has trended downwards in an interesting correlation to Ontario's economic performance..

    Because of the impacts of unnegotiated immigration policies upon language fluency and literacy rates in public education, the resource-rich mobile classes are evacuating to private school or French Immersion and other regional specialized programs. This excerbates the rate of socio-economic disparity. Ryerson's approach to universal public education needs reinvigoration today to reverse this trend.

    The impact of unnegotiated and unsupported immigration impacts on public education are impeding upon an even delivery of education curriculum to all students. Regrettably, a multi-tier quality of education is emerging, where access to private schools or ability to reside in promising public school catchments is determined by nothing other than economic resources.

    This tiered approach may miss excellent candidates who could otherwise qualify to participate in the increasing opportunities in our colleges and universities , which institutions Minister Flaherty mentioned in his speech would be part of the Government's vision of the post-crises world. I am reminded of an education forum where, in Grade 9 at Albion Collegiate, an “at risk” youth learned he was a gifted musician because the school program introduced him to a saxophone.

    The sale and commercial/residential redevelopment of school lands will have a negative impact on neighbourhood quality of life and consequently, real estate values. The school lands are being sold to in a one-time desperate, short-term bid to balance budgets at inadequately funded regional school boards.

    Catherine Soplet
    Mississauga, Ontario

  • http://www.stephentaylor.ca Stephen Taylor

    Approve
    Sent from my BlackBerry device on the Rogers Wireless Network