Saturday, November 24, 2018

Liberals mixed messages on economy a risky ploy

Justin Trudeau and Finance Minster Bill Morneau are sending the Canadian public distinctly mixed messages about our economy in this week's "economic update" (read, mini-budget).
Starting off by stressing how good the Canadian economy is looking at the moment - and it is, despite President Trump's best efforts, a whole load of bad weather, and the precipitous decline in oil prices - Morneau then went on to say that we need a whole bunch of measures to counter the effects of Donald Trump's tax cuts earlier this year. So, is the economy doing well without these measures, or isn't it?
Although no corporate tax rate cuts were introduced (Canadian corporate tax rates are still lower than American ones even AFTER Trump's cuts), various tax write-offs for capital equipment and investments were announced that will reduce the effective corporate tax rate still further.
This is clearly a piece of electioneering on the Liberals' part in advance of next year's federal election, and it has been well received by business leaders. But it comes with a hefty price tag that will increase the budget deficit still further for the next several years, an estimated $5.3 billion over and above the currently predicted deficit for the year of $19.9 billion.
Given that this deficit is already well in excess of what was promised at the last election (around $10 billion), this seems a somewhat risky ploy to say the least. Surely, the Liberals can already stand by their stewardship of the economy, and to break still more egregiously their promises on budget deficits seems to me an inadvisable policy at this point, and the optics are ugly.
But then, what do I know about politics?

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