This Sounds Familiar…
So in today’s paper, our dear Federal Finance Minister Jim Flaherty (whom I have never hidden my distaste for) has stated that he will not hesitate to cut programs should the country’s budget fall into deficit as a result of the softening economy. He will not consider increasing taxes or reversing his illogical GST cuts over the past two years. (Link to story in The Star)
How come this sounds familiar? Who else in recent memory has cut taxes, despite budgetary pressures, and increased spending (particularly on national defence)? Oh yes… George W. Bush. And where is the United States budget these days? Oh yes… a trillion-dollar deficit. I have to give Flaherty some consolation in the fact that I don’t think he could be as idiotic as Bush is — but then again, he’s the one who proposed a commuter rail line to Peterborough in this past budget. Although that’s been scaled back to a ‘feasibility study’ (notice how quietly that happened), the ‘cut taxes and spend more money’ mentality is going to hurt this country’s finances worse than anyone can imagine. Remember, this is the man who left Ontario with a $5.6-billion deficit upon being defeated by Dalton McGuinty - and this was during a period of extremely strong growth.
My fear is that Ontario’s leading the way in dragging the economy down. I’m a realist, and I’m not going to be surprised if we do experience a few quarters of flat, or negative, growth in Ontario’s economy in the coming year. But this is all happening due to changes in the global economy that we have absolutely no control over, like the strong dollar, increased oil prices, and the comatose American economy. That being said, if there’s something that we do have control over, it is Flaherty. His dire predictions and fear mongering of a worsened Ontario economy is only going to lead to a self-fulfilling prophecy: people aren’t going to spend their money if they constantly hear about how the economy is going to tank.
My biggest fear is that here in Southern Ontario, where growth is driven by sectors such as services and construction, the consumer will begin to heed his apocalyptic warnings. Housing starts already decreased slightly in March, and retail spending increased only a measly 1.6% in January (month-over-month) (despite the much ballyhooed GST cut). If a psychologically driven trend begins, we will be in a no-growth situation, and the Federal coffers will be worse off because of it. All thanks to Mr. Flaherty.
