Jim Flaherty has few financial resources to fund new programs

The future of Prime Minister Stephen Harper’s government hangs in the balance tomorrow as the Conservatives deliver what is expected to be a cautious, bare-bones budget tailored for risky economic times.

Despite calls for an immediate bailout package to avoid a recession in Ontario, Finance Minister Jim Flaherty is not expected to unveil any major direct support programs to help manufacturers weather the near-crisis caused by the strong loonie.


And Canadians are not likely to see any significant new across-the-board income tax reductions.

After slashing taxes and sharply increasing spending since 2006, the Conservatives have scant financial resources left to fund new programs for manufacturing despite the fact that hundreds of thousands of sought-after jobs are disappearing. Instead of fresh economic stimulus, Flaherty is likely to stress that the Harper government has already sought to invigorate business conditions by cutting corporate and personal income taxes and trimming the GST.

With the U.S. economic troubles posing more of a threat to Canada than anticipated, Flaherty will say the Conservatives are holding back on additional tax cuts or major new spending to ensure Ottawa does not slip back into a budget deficit.

Because the New Democrats and Bloc Québécois are almost certain to vote against the budget, the Liberals hold the key to the government’s survival.

increased spending

  • Despite talk of restraint, the Conservatives have increased spending by a whopping 14 per cent over two years on policing, a baby bonus, military equipment and other initiatives.

  • Coupled with tax cuts and planned debt reduction, this has left Flaherty with a surplus of only $1.4 billion for 2008-09.

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