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VIEWS: Cameron and Stanford on the Harper budget

Rabble.ca columnist Duncan Cameron writes, “Stephen Harper has a…plan to diminish the federal public service, and reduce its capacity to deliver programs to Canadians. Over the next three years, under the guise of balancing the budget, the Conservatives plan $11 billion of program spending reductions. Why three years, and not four, as previously announced? Because there will be an election in the fourth year, and Harper fully intends to reduce taxes, just before Canadians next go to the polls. The rationale that spending cuts are unavoidable in order to reduce the federal budget deficit is false, since the deficit was due to the recession, and to tax reductions that began in 2000 under the Liberals, and continued under the Conservatives.”

“The Conservatives…pretend that to achieve spending cuts, 80,000 jobs can be eliminated in the next three years through retirements and attrition. Not wanting to talk about people losing jobs, and their homes, and wishing to minimize attention to the planned reductions in federal employees, the Minister for the National Capital Region, John Baird, told the Ottawa Citizen that 80,000 jobs could be cut from the public service without any layoffs. The Canadian Centre for Policy Alternatives estimates that no more than 40,000 jobs could be abolished through attrition, and at least another 40,000 employees will have to be laid off to reach the Conservative targets.”

Cameron adds, “The Conservatives elimination of 80,000 jobs means 45 percent of the 178,000 federal public service positions will disappear. Though it remains to be decided where across Canada the cuts will come, obviously the overall negative impact on the economy on the national capital region of job losses of this magnitude will be immense, since most public servants are based in the capital area. It seems Ottawa has to become a ghost town for the Conservative ideal of small government to be achieved.”

CAW economist Jim Stanford adds, “Lost in the (Conservative) spin are the deeper questions, namely: 1) Why do we need to balance the budget by 2014-15 instead of 2015-16? 2) Why do we need to balance the budget at all? 3) Since the forecast 2014-15 deficit was all of $0.3 billion, why do we need a whole strategic review process and $4 billion of blood on the floor in order to eliminate it?”

Stanford notes, “The current budget timetable is designed to be exceeded. For example, the official budget projects only a $4 billion reduction in the deficit in 2011-12. With GDP growing and the stimulus spending being unwound, this will be vastly exceeded (just as the government just exceeded its own budgetary target for 2010-11 by a whopping $13 billion). Count on Mr. Flaherty to stand up in the Commons next year, to rousing applause from his side, to announce that thanks to his ‘prudent management’, the true deficit for 2011-12 will come in several billion dollars lower than the official $32 billion target.”

“$4 billion in spending cuts, accompanied by normal multiplier impacts (like the estimates contained in the government’s own Economic Action Plan reports) will reduce GDP by close to half a percentage point, and would eliminate tens of thousands of jobs. More likely than not, we will need that GDP and those jobs, given the storm signals already visible on the horizon.”

And Stanford cautions, ” The federal debt as a share of GDP (the true constraint on the long-run fiscus) is already declining. The crisis in Canada is not our deficit, it’s mass unemployment (still 2 million by the broad measures), corresponding hardship in households and communities, stagnant and polarizing incomes, and the risk of another round of macroeconomic turmoil.”

Duncan Cameron’s analysis is at http://rabble.ca/columnists/2011/06/sharpening-their-axes-canada%E2%80%99s-party-moves-shut-down-canada%E2%80%99s-capital. Jim Stanford’s commentary is at http://rabble.ca/blogs/bloggers/progressive-economics-forum/2011/06/03-billion-question.