Canadian Perspective

Posted March 10, 2010, at 6:25 p.m.

Just as Maine isn’t alone among states suffering through an economic recession and the attendant budget shortfalls, the U.S. is not alone among nations grappling with the slowdown. Our neighbors to the north and east have suffered through the same recession. And Canada’s central government has taken similar steps to prime the economic pump.

While the U.S. populace has grown weary of having its wallet — or its children’s wallets — tapped in the name of economic recovery, Canadians have a more tolerant view of deficit spending. A recent survey showed that a strong majority of Canadians favored the government cutting spending to reduce deficits, but most also supported running deficits until tax revenues rise as the economy recovers.

According to a story by Canwest News Services, 54 percent of respondents said a federal deficit doesn’t worry them “at this time.” This sentiment conflicts with the view of economists and business leaders who are concerned that deficits “could become entrenched unless the government takes bolder steps to get its finances in order,” according to the news story.

The nation’s finance minister has promised to not raise taxes, but will begin restraining government spending instead. The Conservative Party, which controls the government in Canada’s parliamentary system, wants to cut services, freeze foreign aid and limit growth in military spending. But before putting the government on a diet, the Conservatives say they are committed to spending the second phase of a $47 billion stimulus package. To put that spending in context, the central government’s projected deficit for this year is $56 billion.

It would seem Canadians, and even the Conservatives who control the government, understand the need to spend during times such as these. If there ever is a time for a central government to carry deficits, it is during recessions, especially if those deficits are the result of spending targeted at getting the economy moving again. The time for fiscal conservatives to rally — in Canada and here — is when tax revenues begin climbing as the economy improves. That is when government is prone to launch new programs, and when voters, feeling confident about their prospects for earning, are less likely to express opposition.

If Canada’s conservatives are supportive of deficit spending to prime the pump, they are similar to their American counterparts in pushing for lower tax rates. The Conservative budget plan calls for reducing corporate income tax rates from 19 percent to 15 percent by 2012. Opposition parties are arguing for canceling the tax reduction and instead funding breaks for the elderly and poor.

Canada’s economy is, to date, recovering more robustly than the U.S., with 5 percent growth in the last quarter of 2009. As with the U.S., the Canadian economy may be teetering between a stronger recovery or a slide back into recession. Teetering between stimulus spending and crippling deficits seems to be par for the course, both here and there.

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