How Canada can beat tough times

Link: http://www.nupge.ca/node/805

Summary
Currently, as we all know, our economy is facing a recession. The world slowdown triggered by the US subprime mortgage debacle dragged Canada into a financial crisis. Economists believe that the economy will continue to decline for at least another few years. Moreover, Canada’s parliamentarians plan to gather next week to debate the federal budget and how they will increase benefits to the economy. Many issues were brought up to question as to who/what will be funded by the federal government.

Chapter 4 Relationship
Referring to chapter 4, having the federalist system is important. Giving limited powers to provincial governments and more power to federal government helps balance levels of issues. In this case, due to national crises, federal government has forced itself to intervene in the situation to assist provincial governments. Public services such as health care, education and public services need to be properly funded, as it is the second highest expense. “It is important that intelligent policy decisions be taken to carry us through tough times while protecting past gains and ensuring a better future.” This statement is very true and is extremely important. Even if we manage to relieve the economy recession, we may face the same situation in the future if we do not plan carefully. What we need is a national public services investment plan funded by initiatives and coordinated between levels of government. Having this service plan will help shelter people’s money, allowing it to build-up on interest. Another connection with the chapter is borrowing money. Right now, some business can’t borrow money because of reduction in credit. The reduction in credit is mostly because businesses have not been making much money from scared consumers. People are afraid of spending money, as some already face the issue of household debts and unemployment. If workers are fearful for their job they are more likely to save rather spend. Like James said, “spending is the economic motor. When economic spending declines it is because spending is slowing.” This is a major problem for businesses because they need to borrow money in order to purchase goods to make profit. If they cannot make profit, the most likely situation for these businesses is bankruptcy. Also, many people will be laid-off like we have seen already in the public sector.

Reflection
Right now, there are several solutions brought up. We can either wait for the world to bail us, wait for businesses to increase spending and investments or have government borrow and invest money in our future. In my opinion, the third option makes most sense at this time. “The federal government today has greater fiscal room to stimulate the economy than virtually every other nation” (Clancy, 2009) Therefore, the governments have an opportunity to provide Canadians with more secure returns on financial bonds. If governments imposes a new tax free savings account which will pay competitive rates with no service charges, people will be attracted to it, thus spending will rise again. Subsequently, the rise in spending will lead to many benefits for businesses.