The federal government should stick to its plan to eliminate $11-billion in public spending by 2015, says former Treasury Board president Stockwell Day, despite the state of the economy, but others are calling for a wider discussion in Parliament and in Cabinet as the Canadian and global economy soften.
Mr. Day, who retired from politics prior to the May 2011 federal election, told The Hill Times last week that the Conservatives' majority status gives the government a mandate to take a unique fiscal approach to the economy, and is urging his past colleagues to stick with the government's controversial plan to eliminate $11-billion in public expenditures by 2015.
"Globally, we've got a unique opportunity here to present a very different fiscal approach," Mr. Day said referring to Canada's ability to balance its budget while the U.S. and EU continue to spiral into deeper public indebtedness.
"I hope that my former colleagues do not lose their nerve, but do what's best for the economy and best for individual economic security and stick with the plan. I'd be surprised if they don't," said Mr. Day, who was a fixture of Prime Minister Stephen Harper's (Calgary Southwest, Alta.) Cabinet throughout five years of minority rule, during which time he served as minister of Public Safety and minister of International Trade before ending his career in the role of Treasury Board president.
Treasury Board President Tony Clement (Parry Sound-Muskoka, Ont.) is leading Cabinet's sub-committee on the strategic operating review. Ministers and senior staff will have to present their plans for five or 10 per cent cuts to their department to the nine-member subcommittee for approval in the coming months. The committee includes Government Leader in the Senate Marjory LeBreton (Ontario) and Minister of State for Finance Ted Menzies (Macleod, Alta.).
Although Cabinet's Priorities and Planning Committee, which is chaired by Prime Minister Stephen Harper (Calgary Southwest, Alta.) and is charged with ratifying committee recommendations and developing strategy, is considered by insiders to be the "real Cabinet," it could be Mr. Clement's strategic operating review subcommittee that becomes the hallmark of this government's Cabinet.
The government plans to find billions of dollars in savings from federal departments' direct program spending budgets in time for the 2012 budget. The review aims to find $4-billion in annual savings out of 67 government departments' total $80-billion operating budgets, for a cumulative total of $11-billion in savings by 2015-2016.
Mr. Day said that majority status frees up Cabinet to take the long view without having to account for the ever-present risk of a non-confidence vote that comes with minority governments. "You're really able to concentrate better on taking the time to initiate legislation or a project," he observed. "It doesn't necessarily alter the priorities, but it increases the chances that those priorities will be accomplished."
The former Cabinet minister and one-time leader of the Canadian Alliance also noted that Cabinet's "planning and preparation looks pretty aggressive" since the May election that guaranteed the Conservatives' four-and-a-half years of uninterrupted governing. Mr. Day noted that the Vancouver region, where he currently resides and operates a consulting firm for clients seeking to influence policy and government, has seen a flurry of ministerial activity over the summer.
Opposition critics have been calling on the government to hold off on the review until Canada and the rest of the world is on more stable economic footing.
"It's not appropriate now given the gravity of the global economic situation," Liberal Treasury Board critic John McCallum (Markham-Unionville, Ont.) told reporters last week. He said that the financial crisis in Greece, and the vulnerability of European banks that have taken on troubled countries' debt has the potential to spark another credit crisis.
The government says the review is a necessary step towards balancing the budget by 2014-15, but Mr. McCallum said the weakening economic situation will mean a drop in government revenue, so it will likely take longer to balance it anyways.
Liberal MP Scott Brison (Kings-Hants, N.S.), his party's finance critic, said the government, particularly Finance Minister Jim Flaherty (Whitby-Oshawa, Ont.), risks repeating the mistake of denying the prospects of a recession as it did in 2008. Mr. Brison called on the government to provide Canadians with details on how it will respond if Canada enters a recession in the third quarter of 2011.
NDP finance critic and potential leadership candidate Peggy Nash (Parkdale-High Park, Ont.) challenged the government's prioritizing of spending cuts over job creation.
"The government has held with ideological rigidity to their determination to accelerate the deficit reduction plan by one year, which makes no sense," Ms. Nash told The Hill Times.
Ms. Nash said the government has focused on giving tax cuts to corporations without conditions for job creation, when it should have been providing small business with tax credits for creating jobs and keeping them.
While members of the opposition have seized on economic uncertainty to challenge the government's plan to balance the budget ahead of schedule, Glen Hodgson, senior vice-president and chief economist at the Conference Board of Canada, said the government is on the right track, but needs to take a closer look at what tax credits are actually working.
"I think there should be a very healthy discussion in Parliament and Cabinet about how quickly you want to take jobs and federal spending out of the economy," Mr. Hodgson said of the strategic operating review. Mr. Hodgson said many of the government's tax credits have been effective, but they deserve the same scrutiny that government departments and agencies are receiving. "Are we getting value for money from every one of those [tax credits]? I'm talking economic value for money, not just political value. They're very clever politics, they've been very effective, but we have to think about the economy first, frankly."
Throughout the summer the Canadian economy has been at the mercy of other countries' financial woes. The U.S. economy, which Canada relies on as a market for at least 70 per cent of exports, continues to experience anemic growth. U.S. GDP grew by only one per cent in the second quarter of 2011, up from 0.4 per cent in the first quarter. This past summer's politically manufactured debt ceiling debate compounded economic troubles in North America. A downgrade of U.S. debt by Standard & Poor's credit rating agency fueled market volatility, not only in the U.S. but throughout the world. As Canada's second quarter numbers account for May to July, third quarter numbers will provide a true reflection of how the impending sovereign debt crisis has impacted Canada's own economic stability.
Diminishing U.S. demand for Canadian exports could be further compounded by U.S. President Barack Obama's $457-billion job creation bill, which is likely to include a 'Buy America' clause. The federal government is reportedly lobbying to ensure that Canada is exempt from any protectionist conditions in the plan.
The pitfalls for Canada's economy don't end south of the border. The EU is anticipating that overall growth in the union's economies will cease by the end of the year, while member states such as Greece, Italy, Ireland, Spain, and Portugal deal with a variety problems that are compounding sovereign debt. Contagious debt has led many states to turn to Germany for bailouts, which threatens to undermine the European Union's long-term viability. Debt default by an EU member state could set off an even larger freeze in global credit than was seen in 2008 and 2009 when sub-prime mortgage lending in the U.S. triggered an international recession. The EU's inability to manage the debt of its member states is especially troubling for the Canadian government, as it tries to broker a free-trade deal that was expected to open Europe to exports and relieve Canada's over-reliance on the U.S. as its primary trading partner.
The prolonged risk of the U.S. and EU economies to Canada will make it more difficult for the Conservative government to tackle unemployment, which dropped below eight per cent a year ago, but has stalled between 7.2 and 7.4 per cent since the beginning of the summer.
Canadian economist David Dodge, who preceded Mark Carney as governor of the Bank of Canada, recently told The Globe and Mail that open debate and dialogue was the basis for good public policy, but with a Cabinet that adheres to strict secrecy, it's unlikely that many decisions on the health of the Canadian economy will be reached publicly.
Origin
Source: Hill Times
Mr. Day, who retired from politics prior to the May 2011 federal election, told The Hill Times last week that the Conservatives' majority status gives the government a mandate to take a unique fiscal approach to the economy, and is urging his past colleagues to stick with the government's controversial plan to eliminate $11-billion in public expenditures by 2015.
"Globally, we've got a unique opportunity here to present a very different fiscal approach," Mr. Day said referring to Canada's ability to balance its budget while the U.S. and EU continue to spiral into deeper public indebtedness.
"I hope that my former colleagues do not lose their nerve, but do what's best for the economy and best for individual economic security and stick with the plan. I'd be surprised if they don't," said Mr. Day, who was a fixture of Prime Minister Stephen Harper's (Calgary Southwest, Alta.) Cabinet throughout five years of minority rule, during which time he served as minister of Public Safety and minister of International Trade before ending his career in the role of Treasury Board president.
Treasury Board President Tony Clement (Parry Sound-Muskoka, Ont.) is leading Cabinet's sub-committee on the strategic operating review. Ministers and senior staff will have to present their plans for five or 10 per cent cuts to their department to the nine-member subcommittee for approval in the coming months. The committee includes Government Leader in the Senate Marjory LeBreton (Ontario) and Minister of State for Finance Ted Menzies (Macleod, Alta.).
Although Cabinet's Priorities and Planning Committee, which is chaired by Prime Minister Stephen Harper (Calgary Southwest, Alta.) and is charged with ratifying committee recommendations and developing strategy, is considered by insiders to be the "real Cabinet," it could be Mr. Clement's strategic operating review subcommittee that becomes the hallmark of this government's Cabinet.
The government plans to find billions of dollars in savings from federal departments' direct program spending budgets in time for the 2012 budget. The review aims to find $4-billion in annual savings out of 67 government departments' total $80-billion operating budgets, for a cumulative total of $11-billion in savings by 2015-2016.
Mr. Day said that majority status frees up Cabinet to take the long view without having to account for the ever-present risk of a non-confidence vote that comes with minority governments. "You're really able to concentrate better on taking the time to initiate legislation or a project," he observed. "It doesn't necessarily alter the priorities, but it increases the chances that those priorities will be accomplished."
The former Cabinet minister and one-time leader of the Canadian Alliance also noted that Cabinet's "planning and preparation looks pretty aggressive" since the May election that guaranteed the Conservatives' four-and-a-half years of uninterrupted governing. Mr. Day noted that the Vancouver region, where he currently resides and operates a consulting firm for clients seeking to influence policy and government, has seen a flurry of ministerial activity over the summer.
Opposition critics have been calling on the government to hold off on the review until Canada and the rest of the world is on more stable economic footing.
"It's not appropriate now given the gravity of the global economic situation," Liberal Treasury Board critic John McCallum (Markham-Unionville, Ont.) told reporters last week. He said that the financial crisis in Greece, and the vulnerability of European banks that have taken on troubled countries' debt has the potential to spark another credit crisis.
The government says the review is a necessary step towards balancing the budget by 2014-15, but Mr. McCallum said the weakening economic situation will mean a drop in government revenue, so it will likely take longer to balance it anyways.
Liberal MP Scott Brison (Kings-Hants, N.S.), his party's finance critic, said the government, particularly Finance Minister Jim Flaherty (Whitby-Oshawa, Ont.), risks repeating the mistake of denying the prospects of a recession as it did in 2008. Mr. Brison called on the government to provide Canadians with details on how it will respond if Canada enters a recession in the third quarter of 2011.
NDP finance critic and potential leadership candidate Peggy Nash (Parkdale-High Park, Ont.) challenged the government's prioritizing of spending cuts over job creation.
"The government has held with ideological rigidity to their determination to accelerate the deficit reduction plan by one year, which makes no sense," Ms. Nash told The Hill Times.
Ms. Nash said the government has focused on giving tax cuts to corporations without conditions for job creation, when it should have been providing small business with tax credits for creating jobs and keeping them.
While members of the opposition have seized on economic uncertainty to challenge the government's plan to balance the budget ahead of schedule, Glen Hodgson, senior vice-president and chief economist at the Conference Board of Canada, said the government is on the right track, but needs to take a closer look at what tax credits are actually working.
"I think there should be a very healthy discussion in Parliament and Cabinet about how quickly you want to take jobs and federal spending out of the economy," Mr. Hodgson said of the strategic operating review. Mr. Hodgson said many of the government's tax credits have been effective, but they deserve the same scrutiny that government departments and agencies are receiving. "Are we getting value for money from every one of those [tax credits]? I'm talking economic value for money, not just political value. They're very clever politics, they've been very effective, but we have to think about the economy first, frankly."
Throughout the summer the Canadian economy has been at the mercy of other countries' financial woes. The U.S. economy, which Canada relies on as a market for at least 70 per cent of exports, continues to experience anemic growth. U.S. GDP grew by only one per cent in the second quarter of 2011, up from 0.4 per cent in the first quarter. This past summer's politically manufactured debt ceiling debate compounded economic troubles in North America. A downgrade of U.S. debt by Standard & Poor's credit rating agency fueled market volatility, not only in the U.S. but throughout the world. As Canada's second quarter numbers account for May to July, third quarter numbers will provide a true reflection of how the impending sovereign debt crisis has impacted Canada's own economic stability.
Diminishing U.S. demand for Canadian exports could be further compounded by U.S. President Barack Obama's $457-billion job creation bill, which is likely to include a 'Buy America' clause. The federal government is reportedly lobbying to ensure that Canada is exempt from any protectionist conditions in the plan.
The pitfalls for Canada's economy don't end south of the border. The EU is anticipating that overall growth in the union's economies will cease by the end of the year, while member states such as Greece, Italy, Ireland, Spain, and Portugal deal with a variety problems that are compounding sovereign debt. Contagious debt has led many states to turn to Germany for bailouts, which threatens to undermine the European Union's long-term viability. Debt default by an EU member state could set off an even larger freeze in global credit than was seen in 2008 and 2009 when sub-prime mortgage lending in the U.S. triggered an international recession. The EU's inability to manage the debt of its member states is especially troubling for the Canadian government, as it tries to broker a free-trade deal that was expected to open Europe to exports and relieve Canada's over-reliance on the U.S. as its primary trading partner.
The prolonged risk of the U.S. and EU economies to Canada will make it more difficult for the Conservative government to tackle unemployment, which dropped below eight per cent a year ago, but has stalled between 7.2 and 7.4 per cent since the beginning of the summer.
Canadian economist David Dodge, who preceded Mark Carney as governor of the Bank of Canada, recently told The Globe and Mail that open debate and dialogue was the basis for good public policy, but with a Cabinet that adheres to strict secrecy, it's unlikely that many decisions on the health of the Canadian economy will be reached publicly.
Origin
Source: Hill Times
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