Federal Cuts Unnecessary

October 21, 1997


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Federal Cuts Unnecessary
Federal Cuts Unnecessary
dated October 21, 1997

Federal Cuts Unnecessary

The elimination of the federal deficit may be short lived if the Liberal government allows the Bank of Canada to continue raising interest rates, says CAW economist Jim Stanford.

Jim Stanford
CAW Economist
"We We did some calculations, using some economic forecasts, over the next five years we show it will cost Canadian taxpayers, 70 billion dollars to implement this high interest rate slow growth policy. What that means is that the coming federal surplus over fiscal dividend that we have heard so much about in the paper lately will be 70 billion dollars smaller over the next five years as a result of high interest rates and slower growth."

The recently released Over the Rainbow economic study proved that all the severe cuts were unnecessary.

Jim Stanford
CAW Economist

"We show in the study that in 1995, that if Finance minister Paul Martin had only frozen spending at it's 1994 levels, instead of announcing the deep cutbacks, he still would have exceeded his own deficit reduction time table; on the strength of lower interest rates and stronger economic growth alone.

So to meet his end deficit reduction timetable, the spending cuts were purely unnecessary. They implemented those cuts because they want small government period, deficit or no deficit."

Just as the economy recovers and unemployment starts to decline, Stanford says the Liberal government is giving in to pressure to slow everything down.

Jim Stanford
CAW Economist

"So the Liberal government is following what Bay Street tells them to do and Bay Street says, increase interest rates, keep unemployment high, slow down growth, keep inflation as close to zero as you can get, and ironically the government follows that advice, they do painful damage to their own fiscal situation because slow growth and high interest rates are a recipe for government deficits, there's no doubt about it."

The Over the Rainbow study is the first of a number of working reports that will make up the "Alternative Federal Budget 98", to be released in February when the federal government brings down its own budget.






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