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Flaherty says U.S. budget crisis could push Canada into a recession

The Canadian Press

By Julian Beltrame, The Canadian Press | The Canadian Press – 16 hours ago November 8 2012

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Reuters – Canada’s Finance Minister Jim Flaherty takes part in a news conference in Ottawa June 21, 2012. REUTERS/Chris Wattie

OTTAWA – Finance Minister Jim Flaherty is urging U.S. politicians to get back to work quickly on resolving their budget crisis now that the election is over, warning that failure would plunge both America and Canada into recession.

The minister has voiced concern before about the so-called “fiscal cliff” — reached if there is no deal to extend about $600 billion in tax cuts and spending beyond this year — but the re-election of both Democrat President Barack Obama and a Republican-dominated House on Tuesday has stoked new fears of the risk becoming reality.

“Of course we’re worried because it would mean, were the entire fiscal cliff risk to come to reality … (it) would put the U.S. economy into a recession quite quickly and the Canadian economy would follow shortly thereafter, and would have a significant effect on the global economy,” Flaherty told reporters Wednesday.

In a later interview on CBC, Bank of Canada governor Mark Carney also stressed the importance of avoiding the fiscal cliff, suggesting Canadian policy-makers — including he and Flaherty — have the option of resorting to “Plan B” if the cliff happens.

“We can have Plan B, we can provide stimulus. We can provide stimulus on the monetary side, the government could take measures,” he said.

“We’re going to watch this closely. We’ll react if necessary, but we’re not going to react to a hypothetical.”

Flaherty said all his colleagues at the G20 meeting of leading economic powers last weekend in Mexico expressed concern about how U.S. policy-makers would deal with the threat.

North American markets also seemed to take the prospect seriously. The Dow Jones Industrials plunged more than 300 points at one point before recovering slightly. There as also a significant, but more modest, sell-off in Toronto.

Flaherty’s comments came amid warnings that gridlock in Washington could allow about $600 billion in tax cuts and spending programs to lapse in the new year. That would represent about a four percentage point hit to an economy only growing at two per cent.

Economists have considered the issue a no-brainer, but Obama and the Democrats have insisted that taxes on the rich rise as part of the deal, something Republicans have balked at the past two years.

Analysts have interpreted the re-election of Obama to the White House as having increased the odds against a deal before Jan. 1, in part because of the aggressive tactics employed by House Republicans in the past.

TD Bank deputy chief economist Derek Burleton said if policy-makers don’t reach a compromise, Canada would likely be impacted through reduced exports to an America back in recession, and a loss of confidence that would likely depress business investment.

While Canada is broadening its exports markets, about 70 per cent of shipments still head south of the border.

“The risks that the U.S. economy will fall off the looming fiscal cliff and fall back into recession is one of the top risks facing Canada’s economy as we head into 2013,” Burleton said.

NDP and Liberal party leaders echoed the concerns, agreeing that Canada and the world would be negatively impacted by a sharp contraction in the U.S., still the world’s largest economy.

The problem, said Liberal Bob Rae, is that there is little Canada can do except root that U.S. policy-makers get their act together in time.

Flaherty said avoiding the crisis won’t be easy, given the gridlock in Washington, but noted his Conservative government operated for five years as a minority.

“It’s not always easy but it can be done.”

The minister said he plans no course change in Canada, saying his eyes are fixed on implementing the March budget and eliminating the deficit in the next few years.

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Posted by on November 8, 2012 in Current Events

 

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Canada has not become ugly and intolerant

Jason Kenney The Guardian, Thursday 27 September 2012 19.34 BS

We’re still a pluralistic nation and welcome legitimate migrants; recent government reforms are about tackling abuse.

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Canada consistently records the highest levels of public tolerance for ethnic, religious and cultural diversity in the developed world.’ Photograph: Dave Reede/Corbis

Jonathan Kaiman depicts an increasingly ugly and intolerant Canada characterised by wanton environmental despoliation and paralysing political soul-searching (Maple leaf ragged: what ails Canada?, 15 September). I suspect this verdict would surprise the nine out of 10 Canadians who recently told pollsters that “Canada is the greatest country in the world”.

It would also confound the many observers who recognise Canada’s global economic leadership, with the strongest fiscal position in the G8.

I will confine myself to correcting Kaiman’s slanders against the most open and generous immigration system in the developed world. He claims that we are “tightening” immigration. In fact, our government has increased immigration to the highest sustained level in Canadian history, and the highest per-capita level in the developed world. He writes that we have “radically adjusted the criteria for successful applications”, when in fact we are making our system more flexible, allowing skilled tradesmen, semi-skilled workers and foreign students to become permanent residents for the first time. He claims that we “cut resettlement programmes en masse”, when in fact we are increasing our refugee resettlement programmes by 20% and have tripled funding for their integration.

Kaiman wrongly suggests that we have “eliminated all but the most basic healthcare for most refugee groups”, when in fact we will continue to fund healthcare for most refugees – such as those resettled from UN camps – more generously than Canada’s general health service. He bemoans a fictitious “harsh crackdown on illegal immigrants”, suggesting that there is something untoward about seeking to remove citizenship from people who obtained it fraudulently and have never lived in Canada. Far from “harsh”, those who contest our efforts have access to an extensive process of judicial reviews and appeals.

Kaiman laments our refusal rate for citizenship when, in fact, our overall acceptance rate last year was 92%. We are also proud to have the highest naturalisation rate in the developed world, with 85% of permanent residents eventually becoming full citizens. Finally, Kaiman imagines that the number of immigrants to Canada from China and India has halved in the last six years, when in fact it has remained constant, with an annual average of 28,000 permanent residents from India, and an annual average of 30,000 permanent residents from China between 2006 and 2010 (the last full year of available data).

Kaiman’s imaginary 50% reduction in Asian immigration is the basis of his most outrageous claim, that “the changes point to a deep-rooted, yet widely ignored undercurrent of racism in Canadian society”. While no society can claim to be entirely free of prejudice, Canada is the only major western democracy without a xenophobic or anti-immigration political movement, and consistently records the highest levels of public tolerance for ethnic, religious and cultural diversity in the developed world.

Canada is frequently lauded as a model of peaceful pluralism. Our government’s recent reforms have made Canada more open to legitimate immigrants but harder on those seeking to abuse our generosity. It is a pity that Kaiman has aligned himself with the radical fringe of racial grievance-mongers in mistaking the rule of law – the backbone of a free and open society – for discrimination.

 
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Posted by on September 28, 2012 in Diversity To Inclusion

 

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