Every time a Canadian spends a buck, they have an extra two cents in their pocket.
Hold ‘em in your hand. Jingle them around a bit.
Do they make you feel wealthier?
They’d better, because we’ve all paid a steep price for them.
Those two cents have helped plunge Canada into deficit.
And this year, that deficit will be substantial.
That’s straight from Finance Minister Jim Flaherty who, in yet another stunning reversal, has embraced Canada’s cash-poor balance sheet.
The question Canadians must ask is, why.
Through an ingenious PR campaign, Flaherty and Prime Minister Stephen Harper have welded the notion of a growing federal deficit to a promised economic stimulus package.
The oft-stated Conservative equation is this: stimulus equals deficit.
The reality is much different.
Following three years of Conservative government, Canada is running a structural deficit.
That is, Ottawa no longer has the money it needs to pay for its core services — food inspectors, biologists, provincial transfer payments, EI, CPP and other sundry items. Lacking the tax revenue, it now has to borrow that money, adding to the national debt.
The cash flow started to dry up in 2008, as the banking and mortgage crisis hit. That’s when Ottawa realized it was in trouble.
The stimulus package wasn’t conjured until the Conservative government was on the cusp of being defeated by the opposition.
So the deficit has nothing to do with the Conservative government’s deathbed stimulus package.
It is solely the creation of the Conservative government, which shaved two cents off the GST, cut personal and business taxes and increased federal government spending by more than $40 billion.
Harper’s double whammy — tax cuts and increased government spending in the leadup to the collapse — created a structural deficit estimated to reach $30 billion over the next four years.
In simple language, Ottawa can no longer afford to pay the rent, heat and cable on its income. It’s living on its Visa, wracking up debt.
Which brings us to Harper’s stimulus package.
It’s the equivalent of the blown transmission you weren’t expecting to replace.
It represents an additional $30 billion that Harper is heaping on the existing national deficit this year.
Canadians are wondering if they’ll have a job in six months, investment-dependant retirees have seen their income eviscerated and business owners are wringing their hands as they see sources of credit dry up and consumer spending falling.
They want the federal government to pony up cash. And they don’t mind Ottawa going into deficit to do it.
Which is why Harper has cleverly fused the deficit to the stimulus package.
The problem is, the deficit existed long before the stimulus package was announced.
And, had it not, Canada would have been in a much better position to weather the financial storm, to provide credit and support to its citizens.
Now, the deficit is far deeper than it needed to be. And Canada’s ability to respond to the crisis is hobbled.
Harper exhausted Canada’s rainy-day funds through his aggressive tax-cut-and-spend policy over the last couple of years. Now, when Ottawa needs cash, there’s no money left. The government must borrow, and borrow deep.
But, every time a Canadian spends a buck they can rub two pennies together, thanks to the GST cut.
Because of that, Ottawa’s ability to help those in need is not what it used to be.
So we suggest you bank those pennies.
You’re going to need them.