Tuesday, November 11, 2008

Prime Minster receptive to premiers'' ideas for ailing economy

It seems that all is sweetness and light for a brief moment. McGuinty praises Harper and even
the premier of Newfoundland made nice! Perhaps the politicians know that the public is not in the mood to listen to partisan bickering for a while at least.

Prime Minister receptive to premiers' ideas for ailing economy

From Tuesday's Globe and Mail
November 10, 2008 at 9:44 PM EST
OTTAWA — Prime Minister Stephen Harper joined with premiers in a rare show of unity yesterday by promising to speed up spending on roads, bridges and other public works to help Canadians weather a gathering economic storm.
Facing a grab bag of requests from territorial and provincial leaders to cushion the economy from a battering, Mr. Harper also pledged at the end of a conciliatory three-hour get-together to review rules that force seniors to start cashing out their eroded retirement investments at age 71.
Separately, Mr. Harper signalled he may be willing to throw a lifeline to Canada's hard-hit auto makers. He said he's looking at “all possibilities” to help them, particularly in light of the massive aid other countries are extending to their car manufacturers.
He said he's “prepared to look at options” to ensure a “strong auto sector in this country.”

The Prime Minister called the meeting to get advice before a meeting in Washington with world leaders on the international financial crisis. He was met with unanimous appeals for help that ranged across the provinces, and agreed with a request to increase the pace of infrastructure funding.
“We all agreed, I think, that we should see infrastructure spending accelerated,” he said.
“This will help support general economic activity. I'm very confident that that is going to occur over the next year.”
The premiers also want Ottawa to delay the age at which seniors must begin taking money out of their Registered Retirement Income Funds. Several premiers expressed concern that, in the current economic climate, forcing Canadians at 71 to begin liquidating their RRIFs would cause significant losses on portions of their earnings that depend on stock holdings.
Mr. Harper said he would look into the issue.
“On the issue of pensions, the premiers came with a set of common concerns there. We are looking at those things,” he said. “We understand that there are some significant concerns both with some aspects of pension regulation in Canada, and I am certainly hoping that [the Office of the Superintendent of Financial Institutions] and others will take a look at those concerns in the not too distant future.”
Manitoba Premier Gary Doer acknowledged that the change could cost government in terms of forgone tax revenue.
“But the bottom line is, what's more important, people's livelihood and the flexibility of their livelihood, or the livelihood of the governments?”
Premiers said Canadians need to hear a message of stability from their governments.
“This is really a time that calls for not just political leadership, but political action,” said B.C.'s Gordon Campbell.
Ontario Premier Dalton McGuinty came to the meeting with a request for an automotive aid package that, he said, should be proportional to the packages being offered in other countries. The United States recently offered $25-billion (U.S.) to its sector.
“If we're the No. 1 auto producer in North America, do we want to retain that position ... [or] lose it?” Mr. McGuinty said. “Is there something worth fighting for here? I think so.”
Mr. Harper said he would keep an open mind.
“We haven't ruled anything out or anything in,” he said.
“What none of us wants, on the one hand, is a sector that would fail and that would cause a tremendous dislocation in the Canadian economy. Neither do any of us want to see a sector that would be permanently supported by the government and that would not otherwise be financially viable.”
Toronto Dominion Bank chief economist Don Drummond said Canadians need to be realistic about the potential benefits of infrastructure spending.
“The Canadian economy is unlikely to experience a meaningful recovery until the U.S. economy finds bottom,” he said, adding that any stimulus smaller than $5-billion is likely to have an insignificant impact on a $1.5-trillion dollar economy.
Mr. Drummond said there are limits to how much infrastructure spending can be “sensibly accelerated” today.
BMO Nesbitt Burns deputy chief economist Douglas Porter said the positive benefits of a fiscal policy boost such as infrastructure spending are at risk of being drowned out by external forces such as weakening U.S. demand, which remains the greatest threat to Canada's economic outlook.
But he said the best arguments in favour of infrastructure stimulus spending are that it would be “in sync with what the global economy needs” – something other countries are undertaking as well – and an initiative that Canada can afford without doing serious harm to its “medium-term financial” health.
Mr. Harper added that he does not plan to cut transfers to the provinces, although the government will follow through with plans laid out by Finance Minister Jim Flaherty to cap equalization payments.
“What we will all want to do is make sure we avoid structural deficits,” he said. “But we're not going to undertake radical cuts that hurt the economy or other levels of government.”
This weekend, Mr. Harper will take part in a meeting of the Group of 20 industrial and emerging economies, where leaders will focus on how to reregulate the global financial system to prevent a repeat of the current financial crisis, which has restricted the availability of credit around the world.

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