http://www.ctv.ca/servlet/ArticleNews/story/CTVNews/20090420/battle_lines_090420/20090420?hub=Politics
Summary
As Canada has lost 300,000 jobs in the first three months of 2009, the federal Liberals were accusing the Conservative government of mismanaging the economy. Liberal Leader Michael Ignatieff emphasized that the Harper government’s stimulus programs is doing little to help reduce the number of job losses, which are “sweeping across the country”. However, the Conservatives responded by pointing out the Liberals will raise taxes to pay down the debt caused by the Conservative’s stimulus package. Both sides are attacking each other’s fiscal policies. The Conservative Government is spending billions of dollars to increase employment and improve economic conditions at the expense of increasing the public debt. On the other hand, the Liberals are hinting to raise taxes, which may lower employment, to eliminate the debt the Conservative government has recently caused.
Stabilization Policy
To get out of current economic recession, the Conservative government has imposed fiscal policies that increased government spending and cut back on certain taxes. The changes in fiscal policies can be referred to as economic stabilization programs where increased government spending can create jobs, therefore lowering levels of unemployment. A reduction of taxes can also increase the country’s GDP, leading to an increase in inflation. A decrease in government spending and an increase in taxes can lower the GDP resulting in higher unemployment, which is a plan the Liberals are considering to do. In this case, the current fiscal policy laid out by the Conservative government is classified as a discretionary fiscal policy, which aims at improving the economy through changing level of government spending and taxation. Since it is easier to gain political approval by having a fiscal policy that increase government spending and reduce taxes, the Conservative government implemented this policy and tried to paint the Liberals as the party that will raise taxes and reduce government spending—a fiscal policy that is unpopular with many Canadians. Discretionary fiscal policies are also known to have huge “inside” and “outside” time lags where effects of those policies can’t be measured until months after they are introduced. This is a major reason why thousands of Canadians are losing their jobs at the beginning of 2009, despite the government’s announcement of increased spending and decreased taxation.
Personal Reflection
Liberal Leader Michael ignatieff does have a very good reason to be attacking the Conservatives for mishandling the economy. Because of the recognition, decision, and outside time lags of the Conservatives’ discretionary fiscal policies, thousands of Canadians are experiencing unemployment across the country. Though increases in government spending and tax cuts may be the right thing to do, the policies have came too late to save the jobs of many Canadians. The Conservative government should have implemented automatic stabilizers months, even a year, before this recession, so those programs would be fully in place now. The government should have injected more money earlier in the employment insurance programs, so when Canadians loses their jobs they can quickly get some financial support, instead of waiting for weeks to get the money, which further slows down the economy.
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6 comments:
Although the ideas on both sides are feasible, I believe that while the Conservatives are dealing with our current situation, the Liberals' fiscal policy will help in the long run. Public debt - as I have just read in Lily’s blog - is ultimately paid off by consumers through increased taxes. While the debt may lower by a small amount through time, it will be insignificant. And so, those who will pay off the rest will be us (students) in the future. A raise in taxes could also help with the current recession as well, with the government spending the money on public projects such as buildings and the tourism industry for the 2010 Winter Olympics.
Jason Choy
Block F
Regardless of whether the Liberals or the Conservatives are in power, we will always face time lags as long as our country is not run by a majority government. A minority government results in a lack of voting power, which in turn, lengthens the process of passing a fiscal stimulus because of the opposing party's position on various issues. In a time like this where economic confidence and consumer spending are quite low, we should be focused on reviving the economy first rather than paying public debt. As lowering the level of unemployment is the priority at this time, the government must inject the economy with more money and lower taxes to encourage consumer spending. Although Ignatieff attacks the Conservative Party for their handling of the economic recession, I do not think our country would fare any better had the Liberals won the election and Stephan Dion was our Prime Minister. The process by which our government goes through to pass a law or bill is bound to give any non-majority party a difficult time unless all parties comply and put the nation's interest first before its own political interests. Even if I was directly told by the government that my generation and future generations will be depended on to clear public debt, I would gladly back the increased government spendings and lowered taxes. Why? Because how else do you expect Canada to get out of a recession? Any further prolonging of a solution is going to lead our nation to a depression. I rather pay more taxes then than have no job opportunities at all.
A very good blog! I agree with you on how the Liberal leader, ignatieff, shouldn't be pointing fingers at the Conservatives for their decision on how to re-boost the country's economy, and accusing them for mismanaging the country. Taken for the reason that they chose to increase government spending and cut back on various taxes to help lessen Canadian's burdens. Although the Conservatives' discretionary fiscal policy are taking time to show its real work, at the same time, I also agree with Jason, you, that a pre-plan should have been put into place before the waves (recession) have attacked.
It is in my opinion, that the public debt is an unavoidable cost. Hopefully, The Conservatives' plans will work out in stabilize our current facing, and re-establish good economy in the nation so we would be in a better financial position to repay our debts!
Both political parties have their own ideas on how to solve or limit the recession. I think they need to realize that either way, to make money, they will have to spend money. I think the best policy would be for the goverment to spend now and create jobs because taxes would discourage spending which is the cause of the recession; a lack of money circulating in the economy. The stabilization programs being implemented to lower the unemployment rates are what the public wants. Public debt is ultimately paid by consumers which is impossible when households do not have a means of steady income.
- Lily Nguyen, Block E
I agree that the policies, as well as automatic stabilizers should have been implemented earlier. I also agree that more money should have been ejected into employment insurance programs so that more workers who have now lost their jobs are able to spend money. When these people, who make up a large portion of consumers, have decreased spending, then the GDP is lower. As a result, even more people will lose their jobs. However, I think the Conservative Party’s plan will help to boost the economy. Public debt will result no matter which method the government uses to get us out of the recession. On the other hand, increasing taxes and decreasing government spending will increase the unemployment rate because consumers will have less money to spend.
After reading your blog, I must agree Liberal Leader Michael Ignatieff does not have a good reason to be attacking the Conservatives. I believe government spending and tax reduction would help the current economic situation. Increase government spending would mean more money is poured into the economy; thus, helping to stimulate the economy. Instead of increasing taxes as the Liberal wanted to do, I concur how the Conservative government in reduces taxes to help promote consumer spending. I also agree that the Canadian government should of implemented automatic stabilizers a year before the recession. Months before the recession hit, economists around the world had speculated the government would have another recession; however, the government showed nothing to help prevent the Canadian economy pull out of the world recession bandwagon.
Michael Li
Block F
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