Mistakes of Depression not in cards: PM

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This article was published 20/12/2008 (6304 days ago), so information in it may no longer be current.

OTTAWA — Stephen Harper describes Canada’s historic return to deficit as a bitter pill for him to swallow, but as a necessary remedy for the ailing economy.

A prime minister who prides himself on being a staunch fiscal conservative has confirmed that he will present a deficit next month as Canada’s string of balanced budgets comes to a screeching halt.

A 12-year era of surpluses will give way to a deficit of up to $30 billion — perhaps more — as the government introduces a series of economic stimulus measures in the 2009-10 budget.

Harper expressed some dismay over the irony that Canada would return to the red under his watch.

After all, he began his political life working to push the mantra of balanced budgets into the mainstream of Canadian thinking from the radical fringes.

Harper authored the 1993 Reform party platform that promised what was a then-groundbreaking idea that the federal government could eliminate a $40-billion deficit in a single mandate.

It wound up happening four years later, and Canada has stacked up a series of surpluses ever since.

“I’m certainly governing in different circumstances than I planned on governing,” Harper said in an interview with CTV News.

“And I’ll be frank with you in saying, yes, I am uneasy about some of the things we’re doing. But we’re in an extraordinary time.”

He added that he found the situation particularly troubling, being a fiscal conservative, but he said his training as an economist would trump his own ideological preference.

Harper said he has learned from the mistakes of the Great Depression, which came about after governments tightened the purse-strings following a stock-market crash and bank failures.

He promised that any deficit will be temporary — with short-term measures to provide training for jobless workers, rebuild infrastructure like bridges and roads, and help struggling sectors like the auto industry.

But right-wing fiscal hawks looked on in disbelief Friday as one of their own promised to plunge the country deep into the red.

They expressed doubt that anyone can promise a temporary deficit — something Harper himself appeared to agree with just a few months ago.

Harper repeatedly said during the election campaign that deficits can become addictive, and once governments lose control over spending it’s hard to go back.

“There are only two times for deficits: natural disasters and wars. This is neither,” said Kevin Gaudet of the Canadian Taxpayers Federation.

“I don’t see how it could be a good thing to (burden) future taxpayers.”

Back in the early ’90s, Gaudet was on a first-name basis with the future prime minister when both were aides toiling for the Reform party.

He said the Stephen Harper he knew would not have accepted this kind of unprecedented, $25-billion stimulus spending spree.

But another longtime Harper confidant suggested that’s a simplistic read of the situation.

Tom Flanagan agreed that no fiscal conservative would applaud the return of deficits.

Some of the stimulus money will undoubtedly be wasted on badly run companies and ill-conceived construction projects, he said.

But he said he supports the initiative — as long as the deficits are temporary.

He said the money could help boost productivity in the long term, with better infrastructure and better-trained workers.

“If this is a temporary phenomenon this is easily affordable,” said Flanagan, who was once Harper’s chief of staff.

“It’s actually modest in world terms… I don’t think it’s something fiscal conservatives need to get upset about — if it is temporary.”

He compared the estimated $25-billion Canadian package to the staggering sums being considered or implemented in other countries — like $1 trillion in the U.S., and $250 billion in Japan.

The deficits will be passed on to future generations of taxpayers, who at the very least will be forced to foot the bill for interest payments on the additional sums being added to the national debt.

But even on the question of debt burden, Canada is faring better than most.

Canada’s debt-to-GDP ratio is lower than any other G8 country’s at about 30 per cent.

The compares to well above 40 per cent in the U.S. and over 80 per cent in Italy and Japan.

 — The Canadian Press