Budget speculation

With the 2011 federal budget fast approaching, many Canadians are turning their minds to the types of measures that might be announced.  We have been told repeatedly by the Harper government that this budget will be about moving to the second phase of Canada’s Economic Action Plan. The first phase involved targeted stimulus spending of $60 billion which not only protected existing jobs of Canadians but paved the way for creating new jobs. In its view, the stimulus spending has been targeted to projects that have enhanced Canada’s competitiveness in attracting the business investment necessary for employment growth. These measures appear to have been successful and Canadians have generally been supportive.

The second phase of Canada’s Economic Action Plan is to involve measures that are designed to realize budget surpluses and reduce federal debt over the medium term. It also involves measures that are designed to meet the challenges caused by increased global competition and an aging workforce. The Harper government expects to become a facilitator of employment and economic growth. It expects government deficit reducing revenue growth to be derived from business and employment growth. It also expects to contribute to deficit reductions through reductions in government spending.

So, it’s fair to say that the hard work of the Harper government is just beginning. The planned return to fiscal balance is sure to cause some angst.  As well, it is not lost on the Harper Government that timing is everything. Any savvy politician will tell you that you cut government expenditures at the beginning of your term and you spend near the end of it. This explains the overwhelming promotion by the Harper government of the benefits of the $60 billion stimulus spending of the first phase of Canada’s Economic Action Plan. Yet, the Harper government cannot avoid at least some revelation of its plans for reducing government expenditure. Given the potential for an election in the near future, you can be sure that any revelations will be tailored to minimize the amount of concerns of the electorate.

Given the amount of resources devoted to promoting Canada’s Economic Action Plan, it’s reasonable to conclude that the 2011 budget plan will be consistent with it. There will be a discussion of the supportive role that the government will play in promoting business investment and employment growth. There will be some discussion about the need for Canadians to be the engines of growth that will produce government revenues. There will be some discussion of steps the government will take to keep government spending at a level necessary to achieve fiscal balance. Finally, it’s reasonable to expect that there will be some measures designed to deal with issues arising out of an aging workforce – maybe ensuring a strong retirement system. Given the federal government’s anticipated budget deficits, it is unlikely that significant new expenditures will be announced.