“Budget leaks” on Thursday suggested that Canada is looking at a $60 billion plus deficit over the next two years.

On November 27, 2008 the Honourable James M. Flaherty, Minister of Finance, in his financial update said “private sector forecasters expect real GDP growth of just 0.6 per cent this year and 0.3 per cent next year (2009). The same forecasters are now widely expecting a ‘technical recession’, with negative growth in the first quarter of 2009”.

Mr. Flaherty went on to say in November that “Canadians and Canadian businesses will pay nearly $31 billion less in taxes in the next fiscal year, thanks to his tax reduction measures introduced since 2006. He also said “The next fiscal year will be difficult but Canadians can be fully confident that we will overcome whatever hardships may lie ahead in 2009, and beyond”.

Let’s examine Mr. Flaherty’s statements in the light of a projected two year, $64 billion dollar deficit. Imagine if his $31 billion reduction in tax intake was not in place.

Government rhetoric suggests that stimulus spending should be short term and “shovel-ready”. I agree there needs to be some short-term and immediate stimulus. There also needs to be some long term visionary infrastructure spending. In respect to short term stimulus, we could look at things like deferred maintenance projects that would target universities, colleges, social housing, roads and bridges.

In respect to longer term infrastructure investments, we should be looking at projects that create permanent jobs and deliver lasting economic benefits. We need to provide transfers to individuals who most need assistance – the unemployed, seniors whose pensions have been devastated by the collapse of financial markets and fixed and/or low income groups who need help to get through the recession. I also think we have to acknowledge that it will be our children who will be paying for the huge deficits that are projected by the government. They will be burdened by the stimulus debt so spending investments should produce benefits for them.

Many of the stimulus options being advanced by all parties are based on Keynesian economics and the Great Depression of the 1930s. I’m not convinced that the times or the situations are comparable. We’re much more dependent today on other countries for our goods and vacation services than we were in the 30s. By Keyne’s standards, the state should stimulate economic growth and improve stability in the private sector by lowering interest rates, lowering taxes and investing in public projects.

The Bank of Canada interest rate has already been cut to the bone. I don’t think we should be offering tax breaks. People who would most benefit from tax cuts will either: bank their savings, reduce their debt or buy goods and services that are produced in large part by other countries. Lowering taxes will only increase the deficit and may create permanent structural deficits.

Much of today’s economic problem is driven by collapse of the American financial sector and the psychological impact of that collapse on consumer demand. We have to fix the psychology before we can fix the economic problem. Barack Obama offers hope. That’s step one. If he stumbles, recession will be longer and deeper. If he inspires, we could start climbing out of recession in the next year.

A national infrastructure project such as a railway retrofit that would take trucks off the highway and increase the speed of on-ground transportation that would in turn, produce jobs, green the environment, lower transportation costs and increase the efficiency of our goods-producing economy could be one way to go.

Alternative energy projects (wind, wave, solar, small hydro, geothermal and biomass) and home retrofits to reduce energy demand would create jobs and help reduce carbon emissions. New public housing projects would create construction jobs and help get people off the street.

Financial stimulus might include suspension of the GST for specific demographic groups who have a need to spend (e.g. under 40 couples). Tax suspension could include first time home purchases and new car purchases. If those people had money in their pockets or tax-generated purchasing options, they could help create demand for home construction and auto purchases and with informed purchase information; they could stimulate demand for low carbon (emission) automobiles and more energy efficient automobiles.

Crisis presents an opportunity for change. In my opinion, Tuesday’s Budget should be about much more than economic stimulus. The Budget should be designed to create consumer demand for Canadian made products and services. It should help to reduce the demand for energy in Canada.

It should favour the purchase of greener equipment. It should provide hope and a vision for the future and it should favour the young because they will be paying for the deficit.

W.E. (Bill) Belliveau is a Shediac resident and Moncton business consultant. He can be contacted at bill.bellstrategic@nb.aibn.com Atlantic Insight is a published Blog inventory of opinion articles published weekly in New Brunswick's print media as written by W.E. (Bill) Belliveau, who is a resident of Shediac, New Brunswick, and small business owner, operating his Moncton-based marketing consultancy, Bell Strategic. He can be reached by e-mail at mailto:bill.bellstrategic@nb.aibn.com