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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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So Obama Wins the Election. What Does It All Mean?

  • by Jeff Fecke  November 6, 2012  8:21 pm
  • This article originally published in Care2 
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    President Barack Obama made history Tuesday night, becoming the first African American to be re-elected President of the United States.

    Obama defeated former Massachusetts Gov. Mitt Romney, who had argued that Obama was to blame for the pace of economic recovery after the 2008 financial meltdown. Obama’s win was a stamp of approval for the president, who has argued that his policies have been helping the economy recover from the worst financial downturn since the Great Depression.

    Obama’s win also represents a huge victory for the civil rights of women, LGBT individuals and immigrants, and likely cements into law the Obamacare health care reforms, which Romney had pledged to repeal.

    Moreover, Obama’s victory was a triumph over a policy of obstruction from the Republican Party, that began the night of his inauguration and continued throughout his first term.

    Health Care Now Secure

    Perhaps the most significant policy impact of Obama’s victory is the long-term health of the Affordable Care Act, which goes fully into effect in 2014. Republicans had promised to repeal the measure, but with Obama having won, they will be unable to do so before the law is enacted, and before many of its best features go into effect. Obama’s victory also ensures that mandates for coverage of contraceptives for women will continue, a mandate Romney had promised to overturn.

    Obama’s victory also means that changes to Medicare that had been championed by Rep. Paul Ryan, R-Wis., are unlikely to be enacted. Ryan, the vice presidential candidate for the Republicans, had argued that Medicare should become a voucher program, which risked ultimately raising the cost of health care for people who qualify for the program. Obama has been steadfastly opposed to any major changes in the Medicare program, and has instead pushed for cost control measures based on improving efficiency in the system.

    Women, LGBT, Immigrant Rights Safe

    Obama’s victory also keeps abortion rights secure for the next four years. The Supreme Court currently has a 5-4 majority in favour of choice, and there was fear that Romney could have appointed a justice to tip the balance against abortion rights. Obama’s victory also ensures that his executive order extending temporary amnesty to undocumented immigrants brought into the country as children will be allowed to stand.

    Obama also will continue to be a strong advocate for LGBT rights. It was not a major issue during the campaign, but Obama campaigned as a supporter of same-sex marriage, and has won re-election with that as his policy. His administration is likely to continue to push for the extension of rights to LGBT individuals, something that a Romney administration certainly would have opposed.

    “Fiscal Cliff” Looms

    The first major test for the newly-elected president is the so-called “fiscal cliff” — the combination of expiring Bush tax cuts and mandated cuts in spending set to occur before the end of the year. Obama has been clear in arguing that he will not accept the extension of tax cuts for the most wealthy. Republicans have demanded extension of all cuts, but with Obama winning re-election, it is hard to see how they would be able to force him to accept that extension.

    Nevertheless, the negotiations represent a danger for all sides. Economists have warned that if all spending and tax policy continues unchanged that it could have a catastrophic effect for the economy, potentially throwing the country back into recession. Both Obama and Republicans will have strong incentive to find a solution that works for all sides.

    Overcame Obstruction

    There is no guarantee that the fiscal cliff can be avoided, of course. Obama’s victory is made more impressive by the fact that Republicans had worked to defeat him since the very beginning of his presidency. At one point, Senate Minority Leader Mitch McConnell, R-Ky., even said that the most important goal of Republicans was to ensure that Obama lost re-election.

    That has meant that Republicans have opposed Obama at all turns, from refusing to support a stimulus package in the depths of the Great Recession to forcing cloture votes on nearly every major piece of legislation to wind its way through the Senate.

    Republicans bet on the idea that by throwing enough sand in the gears and making it hard for Obama to govern, they could ensure his defeat and the resurgence of the Republican Party. They lost that bet. Now comes the question: Will Republicans seek to double down on the same strategy? Or will they work with a president who has won re-election despite their best efforts — especially now that the president cannot seek re-election again?

    The next two years, certainly, will be defined by the way Republicans choose to answer that question. One thing is certain: whichever way they choose to answer, they will still have to deal with the man they sought to sandbag.

    Image Credit: Christopher Wiggins 

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    Posted by on November 7, 2012 in Current Events

     

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    The Obama Renaissance???

    What does it mean for the world ( Canada in particular) now that Obama, the 1st “African-American” male, has been elected President in a majority government.

    The world is about to undergo a great renaissance beginning in the USA. Great time to be alive and living in the USA – a future to look forward to will include major social and cultural changes to the whole multicultural melting pot that makes up the USA population. Then again, what about a President who is a well-educated “African-American” Muslim male figurehead? What is his agenda beyond the economical disaster that he is currently inheriting from the Bush administration? What does this mean for the population as a whole? What is going to be done with the middle-east crisis?

    We can ask a lot of questions and point at the the many facets of depravation that exists and, which were allowed to breed within the ranks of the social structure – welfare, poverty, drugs, lack of social ethics, etc… I’m sure you can see the extent of the problems that need fixing. These problems exist even when the USA is experiencing economic boom.

    The only major change that can be predicted will happen in the “African-American” sector – a change in the mind-set of an evolving cultural group that has been taught to live by other cultural standards. Perhaps now a part of the population mix can finally establish its own cultural identity and fit into the existing social structure of the general population.

    And what about “socio-economic” changes…

    We’ll see!

     
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    Posted by on January 22, 2009 in Current Events

     

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