Harper rejects stimulus to help economy
Stays the course for a balanced federal budget.
The prime minister slammed the door April 7 on the possibility the government would open the vault for a stimulus program to help the economy, which has been hobbled by lower oil prices.
Harper’s remarks came a day after the government unloaded its multibillion-dollar stake in General Motors, a deal expected to help the Conservatives achieve their long-running pledge to balance the upcoming election-year budget.
The government isn’t contemplating stimulus because the weakened economy is still expected to grow, albeit at a slower rate than anticipated, Harper told a news conference in Vancouver.
“Embarking on a major stimulus program when the economy’s growing, and driving us back into deficit, makes absolutely no long-term economic sense whatsoever,” he said after announcing a change to the student loan program.
Harper argued the government will be injecting a “fair bit of money into the economy” this year – even with a balanced budget – through measures such as “very large-scale tax cuts” for families and increased infrastructure spending.
The government also found a way to pump cash into the federal bank account.
Ottawa announced it had sold all 73.4 million of its GM shares, the leftovers from the 2009 effort to bail out the then-struggling automaker.
The Finance Department said Goldman, Sachs & Co. acquired the stock in an unregistered block trade, but few details of the transaction have been made public.
Taxpayers’ GM holdings were worth more than $3.3 billion April 7, based on a US$36.66 price at the close and an exchange rate of $1.2473.
But it’s still unclear exactly how much cash the sale will generate for the federal government.
Harper has repeatedly insisted the government will erase the deficit despite the oil slump – a promise that could be key to his chances in this year’s election, scheduled for October.
The transaction came a few days into the 2015-16 fiscal year, which means the proceeds will help pad the bottom line in this year’s budget. The budget will be delivered April 21.
In November, the government predicted a $1.6-billion surplus for 2015-16, but crude prices tumbled even further in the months that followed. The lower oil prices are expected to indirectly siphon billions of dollars from federal revenues.
The oil slump also forced Finance Minister Joe Oliver to take the rare step of postponing the release of the budget until April. The fiscal blueprint is usually presented in February. Oliver said his department needed more time to get a handle on the market instability caused by the oil shock.
In hindsight, however, observers and political opponents wonder if postponing the budget until April was done – at least in part – to allow the government to put the proceeds from the stock sale on the books in the current fiscal year.
“The Conservatives would sell the gold out of their grandmothers’ teeth right now,” said Liberal finance critic Scott Brison, who also thinks the Tories delayed the budget to draw attention away from the high-profile criminal trial for suspended senator Mike Duffy.
“They will do anything to create a surplus on the eve of an election.”
Brison said one-time asset sales only help create surplus in a single year.
NDP industry critic Peggy Nash said the timing of the GM sale seems suspect with the budget’s release only a couple of weeks away.
The Conservatives, she added, are searching for ways to balance the books after introducing big-ticket tax breaks aimed at families.
In a letter to his caucus colleagues Tuesday, Oliver also hinted the government could make good in the budget on its 2011 election-campaign promise to double the contribution limit on tax-free savings accounts in the budget.
“It seems as though the Conservatives have made a decision to sell the shares simply because it’s a politically convenient time,” Nash said. “Whether Canadians are getting the best deal for their investment remains to be seen.”
Oliver said in a statement that the GM sale means taxpayers are no longer exposed to the market.
The government had long voiced its intention to sell the shares.
“We never believed the government should be a shareholder of a private sector company for an indefinite period of time,” Oliver said.
© 2015 The Canadian Press