Canada Election Issues 2011

In the final days of the Canadian election, some of the issues that stand out because they are ignored or misrepresented in debates are the following:

1. The view that Canada has come out of the worst recession since the 1930s better than most developed countries ignores the circumstances. A recession like an illness has a period of recovery which can stretch out over months and years. Canada may have recovered from the worst aspects of the recession better than other countries, but the recovery is far from complete. A look at the deficit and debt situation in the US, Europe and Japan reveals the need for a reduction of government expenditures and higher taxes. Neither of these fiscal measures will promote growth. In fact they may retard recovery but are necessary because the alternative would be even slower growth.

2. The claim that Canada solved its debt problem once before ignores some differences with the past. Yes, the federal government did reduce program expenditures for a few years in the 90’s but what additionally happened was that tax revenues rose because of worldwide economic growth. That growth is unlikely to reappear anytime soon. A second thing the federal government did in the past was to reduce revenue transfers to the provinces which helped to transfer the problem to lower levels of government. The reduced expenditure on social infrastructure such as roads, schools and police forces is a reflection of the impact of the last recession. Also a continuing debt problem leads to higher interest rates for government borrowing – currently the Greek government is paying 20% to borrow on capital markets.

3. The Canadian economy is not out of the woods in part because today’s circumstances are different and in part because Canada has taken advantage of the “low hanging fruit” which has been responsible for much of postwar growth. The nature of “low hanging fruit” is the subject of Tyler Cowen’s book “How America Ate All the Low-Hanging Fruit of Modern History, Got Sick and Will (Eventually) Feel Better,” (Dutton 2011)….(for discussion in a later posting). The recovery from the 1930s depression was aided by a worldwar in which millions (military and civilians) died.

4. The topic of the replacement jets for the RCAF focuses on the cost without noting that this is a capital expenditure of an item that will last many years and replaces planes that have been paid for and in service for many years. It is not directly comparable to the cost of annual expenditures on government salaries. Although both cost money, one will provide services over a much longer time period. Ask the crews of the aged Sea King helicopters which have been due for replacement for many years and now endanger the lives of the crews. Canada wants to have air-sea rescue facilities but has been unwilling to finance this service. If Canada decides to be part of NATO and to continue to contribute to international security then it has to allocate funds for this purpose.

5. Foreign policy has been absent from the election dialogue. Canada is engaged in fighting in at least two areas, Afghanistan and Libya. All parties agree that Canada should provide training and peacekeeping activities, but fail to recognize that training in a war zone cannot be undertaken without having combat ability to protect the trainers and if needs be go on the offensive. In Afghanistan, the enemy is unlikely to ignore the training of those who will be turned against them in the future. It is a disservice to the military to expect them to act with one hand tied behind their backs.


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