‘Stimulus Exit Plan’ Won’t Work Without Cutting Spending

Prime Minister Stephen Harper and Finance Minister Jim Flaherty today stated that Canada’s deficit will be eliminated over a five year period with no spending cuts or tax hikes. All will be well if we restrain spending for a few years and allow revenue to grow. With all due respect, that just not true.

Program spending has increased by more than 60% in the last 6 years beginning long before there was any drop in revenue, a bailout of General Motors, or threat of Stéphane Dion becoming prime minster with Monsieurs Layton and Duceppe at the ready. In 2013 we will begin to feel the pinch of the baby boomers retiring and the double whammy of increased CPP, GIS and health-care costs on the one hand, and a shrinking tax base on the other.

Anyone who has crunched the numbers will see that there has been a massive and permanent growth in the size of government beyond the so-called ‘Economic Action’ plan over the last six years and that the pressures of demographics will means that even holding the line on spending will be entirely insufficient to balance the budget.

The Trudeau and Muloney governments made the same claim that balancing the budget can be done by getting spending “growth” under control and allowing revenue growth to take care of the rest. We all know the history and how well that worked.

The Canadian Taxpayers Federation has released a detailed plan to make reasonable cuts in spending coupled with freezes that will actually get the budget back in black within three years.

Conservatives should make it known within their party that this situation has a strong smell of the 1970s and 80s, and Liberals and New Democrats should get credible on this issue and hold the government to account, as is their job.

December 22, 2009 Tags: Brian Muloney, Deficit, Deficit Action Plan, Economic Action Plan, Jim Flaherty, Pierre Trudeau, Stephen Harper, Stimulus, Zero in Three Posted in: Blog Content

2 Responses

Wayne - December 22, 2009

If the conservatives have any sense (and guts) they will use the situation to start implementing some sunset clauses on laws and programs that have outlived their usefulness. If they don’t do this, I think we are in for a long period of stagnant growth that will hurt us all.
Thucydides - December 23, 2009

Somewhere or other I remember hearing the Finance Minister claiming there were up to $100 billion in wasteful spending in the Federal budget. Now if this was true (and I am sure that the real figure is probably in that range), then simply identifying and zeroing out this wasteful spending would not only solve the deficit problem right away, but the debt would be eliminated in about five years!

The reduction in interest payments on the debt would allow for real broad based tax cuts, and maintaining this $100 billion/year spending cut for five years after the debt was paid would eliminate the unfunded liability of the federal pension plans as well.

Now I have been unable to find the speech or article where the Finance Minister claimed there was $100 billion in wasteful spending, so I leave it to the readers to see if they can find it.