Would Canada’s Plan B Fix The Economy?

Economy Plan BAs the global economy continues to perform poorly with growing unease in Europe, Asia and the U.S., the need for a Canadian economic contingency plan is becoming more apparent. Should a downward spiral be prompted by a failing European nation or a second recession in the U.S., Canada will find itself increasingly vulnerable as it is no longer in the same strong economic position as during 2007’s economic crisis.

One of the nation’s top economists is suggesting if it comes down to it, Canada should spend more money to stimulate its growth. This “Plan B” suggestion comes from CIBC’s Chief Economist Avery Shenfeld. In the latest Economic Insights report he says, “If the global picture materially sours, borrowing more, particularly at the federal level, and spending more on infrastructure projects [could serve to] reduce future deficits and improve growth in the process.”

He adds that “ramping up government spending on infrastructure, rather than trimming interest rates, may be Canada’s best path should economic growth falter in the next year.”

Is spending more on infrastructure projects really the key to successfully stimulating our economy? Here are a few things to consider.

The Billions  Already Spent On Stimulus

Back in 2008 and 2009, when the world was reeling from the worst economic crisis in history, the Conservative government announced a $35-billion stimulus package. The two-year plan was an effort to reboot Canada’s economy by pumping more money into it. $12 million was earmarked for infrastructure “launching”. In Finance Minister Jim Flaherty’s own words, “We will start construction of roads, bridges, public transit, broadband Internet access, schools and social housing in every region of the country.” It also put Canada into debt for years. More spending on the same would mean Canada would remain in debt longer and more vulnerable to a tax hike.

 Unemployment Is Still Stubbornly High

A recent poll found unemployment and health care top the list of things Canadians often worry about. The Ipsos poll conducted monthly shows jobs are on the minds of most and with the unemployment high at 7.2 per cent, many skilled workers are still looking for work.  The money suggested by the CIBC survey to be spent on infrastructure fails to recognize the many that don’t work in construction or a field that would benefit from this type of spending. This would ultimately mean many remain unemployed – even with the extra spending.

 The Biggest Unemployed Group Are Under 25

New spending would leave out Canada’s most unemployed group, as those under 25 are still suffering with an unemployment rate of 14.8 per cent. Many highly educated university graduates can’t find work because there is nothing available in their area of expertise. Stimulus spending would be much better spent focused on this group of people who are starting their careers and have many years of employment ahead of them. Although some would have skills to get involved with infrastructure building it certainly would not be inclusive of all graduates.

Stimulus spending is always controversial. It spends taxpayers’ money on what some might consider unnecessary programs in an effort to kick-start a lagging economy. It usually pushes a country deeper into debt and can limit a government’s ability to spend money on necessary projects should they arise. A “Plan B” is always necessary – especially when it comes to protecting a nations economy – but that plan should be one that includes all of its citizens and show it has learned from past mistakes.

Related Topics

Economic News / Taxes

One thought on “Would Canada’s Plan B Fix The Economy?

  1. More stimulus is not the answer. It is time for all our public sectors (federal,provincial and municipal)to start living within their means and stop mortgaging our kids futures. The wealth producing private sector can only pay so many taxes and governments need to stop treating it as a bottomless money pit from which they are entitled to draw from whenever they to. The best thing ALL Canadians can do is start at their own household level and get their debts down and save some money for a rainy day. If we all lived with some common sense and did not continue down the path of consumerism our economy would not be so prone to boom/bust cycles. Now that we are more globally connected, it is more important than ever to educate our population to learn to live on less and to do more with less and to be happy with less. We could all do with a lesson from those who grew up in really hard times (WWII)and learn the lesson that being a little more frugal does not mean going without. Living a life of less pays dividends by reducing stress levels and providing one with a feeling of more control over their own well being in a world that is constantly changing and evolving. By living on less and teaching my children of the importance of sharing our world’s limited resources with our soon to be 7B neighbours,we are being better global citizens. Now, if only our governments could learn how to live within their means, life would be that much better in our great country.

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