By Alex Hamlyn
Biz & Tech Editor
So there’s a recession. The global economy is nose-diving, and it’s pointing at a sharp, spiky mountain peak not a marshmallow pillow.
But maybe it won’t be that bad for Canada.
Finance Minister Jim Flaherty’s budget, revealed Tuesday, is predicting a $34 billion deficit, thanks to tax cuts and government spending, for this fiscal year, and $30 billion for the year after. This deficit comes after 12 years of budget surpluses.
Scary stuff.
Or maybe not. This big wad of government dough may be just what our shaky, fractured economy needs.
Some of the cracks showing in Canada’s current finances have been years in the making.
Paul Martin, finance minister under Jean Chrétien, eradicated the previous deficit by cutting civil servant jobs, privatizing Canadian National Railway Co. and radically changing employment insurance.
Employment insurance (EI) was changed so that it offered less benefits and more importantly, reduced the eligibility of some workers. In a strong economy this wasn’t such a problem. There was plenty of work to be had, so even a short spell of unemployment with no government support was doable. Obviously, that’s no longer the case.
One of the most frightening statistics being tossed around is that only 30 per cent of unemployed citizens are able to get EI.
It doesn’t take a fancy graph to show the serious problems that arise when jobs are lost and people can’t get government support.
So fixing EI is a good idea, but some of the budget’s other items are also surprisingly well thought out.
One of the problems that resulted from the fallout of the real estate crash was the loss of construction jobs. A booming industry suddenly fell to nothing and it’s taking a lot of lower to mid-level jobs with it.
Those people who are qualified to build houses are also qualified to refinish roads, work on public buildings and help with a range of infrastructure projects. The $7 billion earmarked for those projects is an excellent way to replace the failing house contracting market.
These cash injections will be about as effective as throwing eggs at a brick wall if people can’t be convinced to spend the money once it’s in their pockets.
Flaherty believes he has a solution to this problem, and it just might work. Tax breaks for people who make less than $80,000 should help keep the wheels of capitalism turning, and go a long way towards getting us out of the red and back to a stable economy.
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