Monday, April 20, 2015

EVERYTHING THAT GLITTERS IS NO GOLD: FISCAL FLEXIBILITY AT STAKE

Does a balanced budget matter? 

The Conservatives are counting on Canadians liking the idea. The Conservatives want us to believe that the balanced budget is proof of Harper's competency  on the economy. When many nations and provinces are forced to borrow cover the bills, Canada has balanced the budget.. Sure it is an accounting trick but watch the spin!

The Conservatives also intend to force all future governments to produce balanced budgets - without the benefit of one-time fire sales of Federal assets. I wonder about all of this spin. 

Can balancing a budget hinder economic problems and growth? If this legislation has been passed 10 years ago we might still be in economic crisis as government would have been straight jacketed from offering programs and incentives to boots the economy.  Let us not forget that the Cons have run deficits for most of there years in power.

What do we gain with a balanced budget? Some envy, lots of questions about creative accounting. Government is not s household, balanced budgets. Moderate deficits stretched out over the long-term, across the ups and downs of the economic cycles makes sense to me, particularly if the economy is growing and not in decline. I would also think that the debt to GDP ratio would have to be considered. The devil is in the details.

The Parliamentary Budget Officer warned in a report last year that the government should not take balanced-budget legislation too literally and should balance the potential risks and benefits.

Balanced budgets will lead to the gutting of social programs, reduced infrastructure programs and perhaps increased taxation, more downloading from the federal government to the provinces and does not allow for strategic investments.

Does a balanced budget matter? Check out the discussion at the Globe & Mail.



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