Here comes the deficit

Relevant Link and here

Now that Obama is president, the focus returns to Canada. The projected deficit in the next budget has been leaked out, and it is $34 billion. Perhaps the most interesting quote from the CTV article is by the parliamentary budget officer, Kevin Page:

Meanwhile, a report released Wednesday by parliamentary budget officer Kevin Page warned that deficit spending could become "status quo" for Ottawa.

In fact, Page's report blamed the coming deficits on permanent tax cuts and spending programs implemented by the Tories since 2006.

In particular, the two per cent GST cut brought in by the Conservatives costs national coffers about $12 billion a year.

It is interesting reading the comments of these news articles, and despite the fact the Conservatives are running a very large deficit, that it is somehow the Liberals' fault. If the Conservatives were so against deficit spending late last year, why have they abandoned their principles and started doing them? If the Conservatives are so fiscally responsible, why do they not intend to roll back irresponsible tax cuts done in 2007's fiscal update statement? Also, why do they think that tax cuts will be an effective form of stimulus? As someone in the so called "middle class", I doubt a $100-$200 tax cut is going to really affect any of my financial decisions, but it would devastate the coffers of the federal government. The same goes with the GST cut. The GST, though it is a poorly implemented tax (a lot of it comes back to you in quarterly payments), was essential to getting us out of debt back in the early 1990s. Even Mulroney commented that he did not like the fact that Harper was cutting it.

Relevant Link

Meanwhile, the Bank of Canada expects economic recovery to start by the end of the year. Now, I'm not denying this is not going to happen, but really they completely dropped the ball on predicting the recession in the first place. On the whole, I think that most of the financial experts try to make the best case scenario so as to keep people positive. However, when you look at the reality of low commodity prices, I just can't see things rebounding quickly. It took nearly a decade for oil prices to rise from its mid-90s low to a price that more reflected the true price of oil, and I think that the US will try its best to keep it low now. The oil sands project will be frozen until prices are above $80, and I just don't see that happening for several years. Then you hear things like how Vale Inco might shut down their mines in Sudbury for a few months (the mines represent about 10% of the world's nickel production), and you get a sense on how bad things are in the resource sector. The Canadian government (and provincial governments) foolishly squandered the surpluses generated during boom times and did not invest in parts of the economy that would generate more stable jobs. Without high resource prices, Canada's return to prosperity will be long and hard.

It doesn't surprise me in the least that Canada's productivity levels are among the worst in the civilized world. We need to invest in new technology and stop relying on the cozy world of non-renewable resources. Productivity will also decrease as our population ages. All of this paints a pretty bleak picture.