We've seen this story before in the mid-1990s, when out-of-control deficits and an impending sovereign debt crisis led to painful spending cuts and tax increases. The government is wrong to make the return to budget balance conditional on strong economic growth. Population aging is already taking its toll on long-term projections, and too many unforeseen events can derail the fiscal path. Only tight fiscal discipline can balance the budget within a reasonable timeframe, protecting Canadians' standards of living from future large tax increases and cuts to government services.
The problem with using stock graphs to decide whether or not it is time to sell a company's shares has to do with the importance that people place on observations. Simply put, the most recent past is frequently seen as more diagnostic than the distant past, and so lines on a graph can be misleading.
The Canadian economy is "technically" in a recession, as 2015 ended with two consecutive quarters of contracting GDP. Whether or not you personally agree with classifying the current economic situation as such, we are going through tough times. However, the recession does not seem to be bothering most Canadian economists -- or, for that matter, most Canadians.
Spending one's way to growth is nothing new. What is new, and what is a first for almost any developed country is that Canada will be using both monetary and fiscal policy as a way to get the economy growing again at the expense of a balanced budget. For the economy as a whole, it is unequivocally good news.
Despite all the news about plunging oil prices, a weak dollar and hits to the manufacturing sector, small business owners are optimistic that they can weather any ups and downs in the economy. In fact, 86 per cent anticipate a growth in business while 43 per cent plan to hire new employees. Only 10 per cent of respondents anticipate a decline in business.
On its surface, the suburban Ontario constituency of London West is like so many ridings in the province. Dotted with sprawling established neighbourhoods, the community's residents personify Protestant Ontario: reserved, small-c conservative and hardworking. But the economic landscape in London West has changed significantly since the Harper Conservatives took power almost a decade ago. With economic fears front and centre and conventional political wisdom out the window, this formerly unremarkable riding has quickly become a microcosm for the October 19 federal election
With the confirmation of the Canadian recession by Stats Canada earlier this month and the government's subsequent announcement of a $1.9 billion surplus, spending has become a particular point of interest in our upcoming election. Small business owners, who make up 98 per cent of employer businesses in Canada, will be looking to see which party's proposed spend will have a tangible effect on their bottom lines.
With the economy contracting, oil prices sliding and the prospect of a balanced budget looking increasingly unlikely, Conservatives feared damage to their vaunted reputation as competent economic managers. As it turned out, Statistics Canada data confirmed that Canada's economy slipped into official recession in the first half of 2015 -- the damage was done.
One of the most important steps the Canadian government can take to kickstart the economy is a large-scale program directed at renewing our national infrastructure. It will help drive job creation while generating about $1.60 of GDP for every $1 spent. And it will transform the present value of low interest rates into long-term capital assets underpinning greater Canadian productivity.
The worst kept secret regarding the economy was made official today -- Canada is in a recession. There is nothing technical about it; the definition of a recession is relatively straightforward: two consecutive quarters with negative economic growth. The fact that this definition might not be convenient for a sitting government's, which holds itself out as brilliant economic managers, political fortunes is irrelevant. By any objective standard, the Canadian economy is under-performing.