OTTAWA - Canada's leading left-wing think-tank believes Canadians can have their cake and eat it too in the next federal budget — more spending to create jobs while still moving toward balancing the books.
The proposals are contained in the Canadian Centre for Policy Alternatives' annual alternative federal budget, being released this morning, which Finance Minister Jim Flaherty has already dismissed out of hand, sight unseen.
Flaherty said on Friday he has no intentions of ramping up spending to stimulate the weak economy, and instead plans to trim further in order to meet his 2015 balanced budget target.
But the CCPA argues that Flaherty is going about it all wrong, and that his policies will only guarantee continued slow growth for Canada.
Economists believe Canada's economy will advance by only about 1.7 per cent this year, similar to last year, constituting the worst two years of growth since the recession.
The think-tank points out that austerity has done little in Europe but help sink the continent's economies, while at the same time driving up deficits as government revenues collapsed.
"Canada has a growth problem, not a deficit problem," says alternative budget co-ordinator David Macdonald.
"More cuts will only lead to less growth and fewer opportunities for Canadians."
The group notes that at 1.5 per cent of gross domestic product — the economy's total annual output — and with interest rates at record lows, there's no reason for Ottawa to obsess about the deficit.
By comparison, the U.S. recently posted deficits as high as 10 per cent of its GDP.
Instead, Flaherty should be investing billions of dollars to rebuild Canada's infrastructure and in measures to reduce poverty through investments in child care, pharmacare, affordable housing, post-secondary education, and better income supports.
The alternative budget also would boost spending to meet the crisis in First Nations communities, including for housing, drinking water and education.
If all the proposals are adopted, the CCPA believes Ottawa will create 300,000 additional jobs and drive down the unemployment rate one point to six per cent by 2014.
To pay for the investments, the alternative budget calls for the creation of a new 35-per-cent tax bracket to kick in on income over $250,000, and a roll-back of corporate tax cuts, which it argues enabled firms to stockpile over $600 billion in cash and short-term securities, while failing to trigger more investment.
According to the CCPA, if Ottawa follows its proposals, it will still be able to balance the books by 2016.
The Conservative government has given short attention to the CCPA's recommendations in the past and is unlikely to adopt any in this year's budget, expected in the last week of this month.
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The Northwest Territories were the only jurisdiction in Canada that saw a negative growth rate in 2011, largely due to a decline in diamond exports. Source: StatsCan Photo: Alamy
New Brunswick: 0%
New Brunswick's economy flatlined in 2011 due to lacklustre business investment and a pull-back in government spending. Source: StatsCan Photo: Shutterstock
Nova Scotia: 0.5%
Business investment grew strongly but consumer spending was weak in Atlantic Canada's most populous province in 2011. Source: StatsCan Photo: Alamy
Prince Edward Island: 1.6%
Business investment grew rapidly but foreign trade declined in Canada's smallest province in 2011. Source: StatsCan Photo: Shutterstock
Canada's most populous province didn't grow as strongly in 2011 as it did in 2010, but a big jump in imports and exports helped to keep the province in positive territory. Source: StatsCan Photo: Canadian Press
Consumer spending helped keep Quebec afloat in 2011, despite a major slowdown in business investment into the housing sector. Source: StatsCan Photo: Alamy
Heavy rains and flooding put a damper on economic growth in Manitoba in 2011, but the province still saw a significant increase in consumer demand. Source: StatsCan Photo: Alamy
British Columbia: 2.8%
Business investment in housing in B.C. in 2011 grew at double the rate of 2010, helping the province to a solid economic performance. Source: StatsCan Photo: Canadian Press
Construction for the oil, gas and mining sectors boomed in Newfoundland in 2011, helping to propel the island to one of the higher growth rates seen among Canadian provinces. Source: StatsCan Photo: Alamy
Nunvaut's 4.6 per cent growth rate in 2011 is nothing compared to its 16.6 per cent growth rate the year before, but the territory booming gold and silver mining sectors are still humming along nicely. Source: StatsCan Photo: Alamy
Growing oil exports and a housing investment boom drove Saskatchewan's economy to an impressive growth rate in 2011. Source: StatsCan Photo: Alamy
The fastest-growing province in Canada in 2011 saw its exports jump a formidable 9.2 per cent over the course of the year. Source: StatsCan Photo: Canadian Press
Yukon Territory: 6.5%
The Yukon hasn't been thought of as a boom region since the Gold Rush of the 19th century, but mineral exploration is still driving its economy today. At 6.5 per cent, the territory had the fastest economic growth in 2011 of any Canadian jurisdiction. Source: StatsCan Photo: Alamy