Link:http://www.theglobeandmail.com/servlet/story/RTGAM.20090121.wPOLbudget0121/BNStory/politics/home
Summary
With almost a week before the Conservative government announces their federal budget, a Canadian parliamentary watchdog, Kevin Page, released projections that the federal government is at risk in wiping out almost all the debt the country has paid off since 1998. According to Page, Canada has paid down $105 billion in debt over the 11 year period and the ruling Conservative government could eliminate that debt reduction within the next five years in their next federal budget. The parliamentary budget officer also warns that his findings did not include the stimulus package that the government promised in the next budget, which can be a $20-30 billion stimulus plan. Page’s report projects the government will run a budget deficit of $14 million next fiscal year and if you include the huge stimulus package it could amount to around $40 billion just next year alone, wiping nearly all the debt reduction Canada has paid off since 1998.
Government Borrowing
Chapter 4 mainly discusses the different sources of government revenue. Currently in Canada, borrowing is considered to be one of the major sources of revenue for the government as an alternative to taxation. In the next fiscal budget, the Canadian government seems it will be running a huge deficit, meaning it will have to borrow money from either its citizens or other countries to pay for its expenditures. The government could ask the bank corporations and its citizens to buy government bonds as a form of borrowing. With Page’s findings projecting that the government could run deficits in the next five years, Canadians should also expect Canada’s net debt to increase. With the Canadian government facing enormous pressure from several of ailing industries, thousands of jobless people, and even the opposing political parties to spend money to stimulate the economy, Canadians need to realize is it really worth it in the long term. If we continue to keep borrowing money from foreign countries, especially at a time where our currency is falling, our debt will never be paid off, furthermore, there is no guarrantee if the stimulus package can really make a difference to our economy as our reliance on foreign trade is huge. For example if no one in the world is buying our wood to build houses, our logging industry would suffer regardless of the stimulus plan. Canadians ultimately need to think is it worth going billions of dollars into debt, wiping out nearly all of the debt reduction in the past decade.
Personal Reflection
I would oppose the next federal budget if the government decides to go into a $40 billion deficit in the next federal budget. Despite that many Canadian industries are suffering because of the economic downturn, the government should not wipe out nearly the entire debt reduction Canada has achieved in the past decade. If the government borrows the money to pay for the stimulus package, Canadians overall will be suffering in the long term. Debt charges such as interest payments already make up over 15 percent of the federal expenditures and are ranked the second largest component of government spending. If Canada borrows the money now, interest charges will need to be paid later on in the years to come, that means there will be less money being spent on the actual social services for Canadians; the expenditure of interest and debt charges will never go down. This is why during the economic downturn I feel we should minimize the stimulus plan and just focuses on a couple of suffering industries. I believe we should focus on the trade industry to improve our infrastructures and get more people working. We should also focus on the auto industry as one in seven jobs are somewhat related to the auto sector. Since our country in the past 11 years have been making progress in paying down the debts, I feel the efforts should not be wasted and we should still try to continue that trend and not eliminate nearly all the debt reduction we have achieved despite the unprecedented economic hardships.
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3 comments:
The Canadian Government must either increase the tax to gain more revenue, or borrow money. In this situation, raising the tax might further harm the economy. If taxes are raised, then consumers will have less money to spend, causing market activity to decrease. Furthermore, businesses may choose to cut the number of hired workers in order to compensate for the extra money paid in taxes. Therefore, raising the tax is not a good option. So the government of Canada does not have a choice, but to borrow money as it is the only alternative way. The Canadian government could borrow within Canada, so that it does not depend on other countries. If the stimulus plan does not proceed, than the economy may worsen. Also, citizens would complain that the government is not doing anything to help ease the situation if a stimulus plan is not implemented. Therefore, I agree that a stimulus plan must be organized not matter how much it will cost the Canadian Government at the moment.
Wow. Prior to this, I had no clue Canada was planning to get such a big loan. But from the sounds of your blog, I can't really seem to find anything positive to the government's decision. So I would have to agree with you on not supporting their judgment on how to recover Canada’s economy. If the government sticks to their plan, the results would only make Canadian citizens suffer, like you mentioned. With the economy already going down, it would be terrible to see Canada’s dollar go down with it. Once the government decides to go into the $40 billion deficit, they will have to think of ways to earn the amount back to pay off the loan. The first approach to this situation would definitely be to tax citizens. But citizens are already trying hard enough to survive these hardships, is it necessary to add to their burden?
K. Li
Blk F
I agree with your reflection, the Federal government should reconsider getting that money because it would wipe out all the debt that Canada has paid off. I'm quite worried about what the government will do if they allow the stimulus plan to go onward, raise in taxes maybe? The decision may affect people directly it that is not bad enough. Also, i agree with the issue of spending too much money and not enough on internal issues, such as social services and medicare. I myself am not too sure if the risk of this decision is worth it.
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