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Fraser: Stimulus spending and programs causing deficit

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Staff writer ▼ | February 6, 2014
Stimulus spending and programs in Canada remained in place after their planned expiration date, producing unnecessary deficits and public debt, finds a study by the Fraser Institute.
VancouverStimulus spending and programs in Canada remained in place after their planned expiration date, producing unnecessary deficits and public debt, finds a study by the Fraser Institute.


During the global economic decline, Canadian employment dropped by 431,000 (or 2.5 per cent) from October 2008 to July 2009, and the overall economy contracted by 3.3 per cent. In response, notes the study Post-Stimulus Spending Trends in Canada, the federal government and provincial governments enacted fiscal stimulus plans.

But that didn't happen. For example, in 2009 the federal government launched its two-year stimulus plan, also known as Canada's Economic Action Plan, which contained $45.4 billion in new spending and tax relief initiatives.

Program spending spiked in 2009-10 by $36.2 billion in year one and remained elevated in year two. This 17.1 per cent increase in program spending was supposed to end after two years, but the Harper government has not yet fully withdrawn this spending, and as a result, produced longer and larger deficits.

The government now estimates it will have accumulated $68.5 billion in deficits from 2011-12 (the first post-stimulus year) to 2015-16, when it expects to balance the budget.

The provinces have also maintained stimulus spending-levels despite original plans. The Ontario government, for example, launched in 2009 a two-year fiscal stimulus plan, which included $32.5 billion in infrastructure spending and subsidies. These spending increases, proposed as "temporary," were extended.

Consequently, based on current projections, Ontario will have accumulated $47.8 billion in deficits from 2011-12 (the first post-stimulus year) to 2017-18, the year it expects to balance the budget.

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