[R-G] Conservatives' Budget Skimps on Stimulus

[Anthony Fenton]

ECONOMY-CANADA:  Conservatives' Budget Skimps on Stimulus
By Paul Weinberg
http://www.ipsnews.net/news.asp?idnews=45671

TORONTO, Feb 4 (IPS) - Canada's reluctance to institute a full  
stimulus package in the recent federal government budget has  
international parallels, says Armine Yalnizyan, a senior economist at  
the Canadian Centre for Policy Alternatives.

"Many of the governments that were very quick to act to restore credit  
to the system have been much slower to roll out money to respond to  
the need to replace the jobs that are being shed," she told IPS.

The longer time that governments take to implement a full stimulus  
package to create jobs and encourage citizens to spend money in their  
respective countries, the greater the likelihood of "something that is  
far worse than it needs to be" in the world economy, Yalnizyan said.

She observed that it is hard for most national governments, including  
Canada's right-leaning Conservative-led minority administration in  
Ottawa, to wean themselves from the philosophical path known as the  
Washington Consensus.

"It is very difficult to turn that around because government has been  
perceived for almost 30 years now as the problem and the market as the  
solution. And it is very difficult to change a very firm mindset among  
the governing elites that it is not serving people very well," she said.

Nevertheless, Tuesday's passage of the budget in the House of Commons  
in a 214 to 84 vote with the reluctant support of the Liberals, the  
major opposition party, was inevitable, given the promised spending of  
28.3 billion dollars over two years on everything from income tax cuts  
and help for home renovations to enhanced jobless benefits and funds  
for urban reconstruction.

Given the weariness of the Canadian public towards the notion of  
another federal election - Prime Minister Stephen Harper's  
Conservatives were just reelected with an increased minority  
government last October - there was little appetite for having the  
federal budget, albeit not entirely perfect, turned down and forcing a  
national vote in the process, says Chantal Herbert in a column for the  
Toronto Star.

"In their quest for parliamentary survival, the Conservatives have cut  
and pasted a lot of old-style Liberal spending initiatives and spread  
them pretty much across the board. It is hard to think of a  
constituency, friendly or hostile to the Conservatives, that will not  
get a piece of the multibillion-dollar stimulus package the government  
has cobbled together," Herbert said, adding, "Environmentalists are  
the possible exception. True to Conservative form, the notion of  
adjusting Canada's economy to the realities of climate change comes  
across as an afterthought."

The Conservatives were almost ousted last November when they  
introduced an economic statement that contained no stimulus package  
and also included measures to reduce election financing for political  
parties, which particularly threatened the defeated Liberals - in debt  
from the last election.

Herbert adds that Harper and his government appeared to have learned  
their lesson this time and introduced a budget minus the noxious  
measure that was designed to win the support of the bruised Liberals,  
ill-prepared to fight another election so soon under a new leader.

Nevertheless, the Liberals could have legally helped to defeat the  
Conservative minority government under Canadian parliamentary rules  
and taken over the country with the support of two other opposition  
parties in some form of coalition, commented Nelson Wiseman, a  
University of Toronto political scientist.

But with no political precedent of that ever happening before in  
Canadian history, this was not a real option, given the regional  
divisions that might have resulted - with the Conservatives strong in  
western Canada and the Liberals more of a force in the east, he  
continued.

"The coalition idea however has now taken root and I expect it to  
sprout," Wiseman told IPS.

A formal coalition led by the Liberals joined to the hip with the  
social democratic NDP is not ruled out by Wiseman down the road with  
minority governments becoming the norm in a four-party Canadian  
parliament.

"As the economy continues to weaken," added Wiseman, "[Canadians] will  
be more disenchanted with whoever is in charge, and that happens to be  
the Conservatives and Harper."

One of the concerns of the mayors of Canada's major cities is that  
much of the promised 3.2 billion dollars in urban infrastructure  
spending under the Building Canada Fund will be held up by regulation  
and that little of the funds will flow immediately to needy areas such  
as public transit.

Toronto Mayor David Miller has complained of delays in the past in the  
availability of previously promised financial assistance by the same  
government. "Placing rigid requirements on funds like this does not  
work. The dollars need to be invested, not written down on paper. This  
is full of red tape," he told reporters.

Insufficient infrastructure spending to spur new jobs and the  
resistance by the current Conservative government in its latest budget  
to ease up on the tight regulations to access jobless benefits could  
prove disastrous in the coming months when six out of 10 Canadians  
will find themselves ineligible for income support and be forced to  
live on their savings instead, warns Yalniziyan.

"Far more serious and far more grave is the fact that this government  
is looking at the hundreds of thousands of jobs that were lost in the  
last few months and full knowledge that many more hundreds of  
thousands will be lost in the coming year," she said.

Leo Panitch, a Canada research chair of comparative political economy  
at York University, observes that Canada's economic stimulus package  
amounts to only one percent of gross national product, compared to the  
five percent about to be invested in comparable moves in the U.S. by  
the administration of Barack Obama.

He also noted that the Canadian government's "rosy" predictions of 2.4  
percent initial growth followed by a further advance have been  
contradicted by the International Monetary Fund - which forecast a  
mere 1.6 percent growth for Canada.

Panitch is not sure that the Canadian strategy of maintaining a  
tightly regulated banking system, a reliance on the high demand for  
its commodities, particularly oil, and economic integration with the  
U.S. will save this country from the economic downturn.

"People had been saying that Canada will suffer least from this  
recession because at least we were doing very well in commodity  
prices. But now commodity prices and oil prices have tanked," he said.

(END/2009)