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Finance Minister Bill Morneau will deliver his first federal budget in less than a week. At that time, Canadians will learn which campaign promises the new Liberal government will prioritize and how they intend to pay for them. But Philip Cross, senior fellow at the Macdonald-Laurier Institute, wants to know whether Morneau has learned to say “No.”
Morneau has already said the government is projecting a deficit of more than $18-billion – and that’s before adding any new spending. The new government has promised to undertake a massive infrastructure spending program, reform Canada’s child tax credit and cut taxes for Canada’s middle class.
“I think the odds Morneau will say ‘No’ in this budget are very low,” Cross told BNN.
Cross worries the new government will believe its own election rhetoric about the weak Canadian economy and overestimate the effectiveness of stimulus spending. With the exception of Alberta, which has been hit hard by the crash in energy prices, Canada’s economy continues to post modest growth.
“There’s no reason for panic, there’s no signs the economy is out of control,” Cross said.
The budget will reveal details of an infrastructure spending program Ottawa hopes will help jumpstart Canada’s economy. But stimulus spending may not give Canada the economic boost many expect, according to Cross. A recent report from the U.S.-based National Bureau of Economic Research shows that deficit spending is often ineffective with countries that have a floating exchange rate, or when total government debt hits about 60 per cent of total GDP. Canada fits both of those criteria. “Deficit spending may not be as simulative as many people think,” he said.
Cross argues the best way to help Alberta – and build out Canada’s infrastructure – is to encourage the development of pipelines that would help Canada’s energy sector get its oil and gas to market.
“We’ve got private companies lined up left and right waiting to do this just waiting for the okay from government bodies.”