Analysts on Canada's budget: ‘Deficit paranoia is mind-bogglingly stupid’
Awaiting the budget
Canada’s new government is expected this week to unveil a stimulus budget with a deficit in the area of $30-billion.
That would count as bad news for some who crave balance. But for others, it may not be enough given the sluggish economy and unemployment that refuses to drop below 7 per cent.
Finance Minister Bill Morneau has already adjusted the outlook amid the oil shock, projecting a deficit of $18.4-billion in the 2016-17 fiscal year, not including the Liberal government’s promised spending initiative. When you add it all together, it’s looking like about $30-billion.
Besides infrastructure spending, Canadians can expect to see a new child benefit, changes to the jobless benefits program and a tweak to tax rules governing stock options.
Economists aren’t waving red flags over what they expect to see, and some observers would like even greater stimulus spending than Mr. Morneau will probably unveil.
They’re not suggesting throwing caution to the wind, but they do note that Canada is able to handle what’s expected.
Here’s what some observers say:
“Deficit paranoia is mind-bogglingly stupid. … Even a $50-billion deficit wouldn’t endanger the long-term outlook for the public finances, however. The bigger risk is that if fiscal policy doesn’t take up the slack, the economy could slip into a prolonged downturn. It would be a tragedy if, after watching Europe nearly destroy itself, Canada made the same mistake.” Paul Ashworth, Capital Economics
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