Chapter 8 – Stabilization Policy

Liberals hiding out on the economy

http://rabble.ca/columnists/2009/04/liberals-hiding-out-economy

Summary:
Canada still faces its most severe economics crisis since the 1930s, but the Liberal party (the official opposition), says nothing about what needs to be done to improve the economy. One explanation is that they do not think the current economic situation is serious enough to raise new thinking. The Liberals did vote for the Conservative budget on January 27, 2009. Although far from offering adequate support for Canada’s failing economy, a recent report from the CCPA shows that Canada had already lost as many jobs (189,000) as the budget has planned to create in the next year.

The Public Debt:
The total amount of money owed by all levels of government is referred to as the public debt. Since borrowing is greatest at the federal level, Canadians have become increasingly concerned about the size and cost of this debt. Responding to this, the Liberals were proud of putting taxpayers’ money into paying down public debt, rather than using the $10 to 20 billion a year for health care, poverty reduction, child care or for research. During a recession, it is better to finance government expenditures through borrowing than through taxes. During a recession, people must be encouraged to spend money.

Reflection:
Canada’s national debt is a huge problem for the government. They should consider putting more money into public services like health care because the economic climate has deteriorated rapidly. The CCPA report points out that, in 2008, personal bankruptcies increased by 50 per cent. Also, over 300,000 people have lost their jobs in the last five months. Removing money from the circular flow by raising taxes and spending it to reduce the national debt reduces the ability of the public to spend money. The government should consider more action into supporting the people and stabilizing the economy by spending taxpayer dollars into public services.