$33b stimulus package needed, says think-tank: Monetary infusion would create 400,000 jobs, according to alternative federal budget
ERIC BEAUCHESNE, Van Sun/CANWEST NEWS SERVICE
JANUARY 5, 2009

OTTAWA — A one-year fiscal stimulus package worth almost $33 billion that bolsters employment-insurance benefits, municipal infrastructure, training and post-secondary education, and promises to create more than 400,000 jobs, is being proposed Tuesday by an economic think-tank.

The $32.9-billion package, proposed for the Jan. 27 federal budget, is equal to 2.1 per cent of gross domestic product, which is consistent with the recommendations of the International Monetary Fund and other international organizations, the Canadian Centre for Policy Alternatives notes in its annual alternative federal budget.

The package is designed to protect Canadians who suffer a loss of income from the worst of the recession while also strengthening the country's national infrastructure and addressing the challenges of climate change, income inequality and an aging population, it says.

"We've laid out a bold and achievable set of initiatives that can protect Canada from the economic storm while building for future generations," said Armine Yalnizyan, chief economist at the research organization. "Our plan creates jobs and gives the economy a jolt of life just when it needs it — now."

The left-of-centre think-tank, which has a better track record than the government itself in forecasting federal financial results, warned the government in November — prior to the federal budget update — that the economy was going into recession at that the government was going into deficit.

Finance Minister Jim Flaherty, who projected ongoing surpluses and continued economic growth in his budget update, has since acknowledged that the economy is going into recession and that government will slide into the red….

A breakdown of the proposed key investments include:

• $12.4 billion to strengthen the employment-insurance system so more out of work Canadians receive benefits, and to provide income support for low-income seniors, children and the working poor.

• $14.7 billion to strengthen and build municipal infrastructure and affordable housing, invest in child care, post-secondary education, and honour the First Nations Kelowna Accord negotiated by the former Liberal government but scrapped by the Conservative governments of Prime Minister Stephen Harper.

• $5.8 billion investment in "green infrastructure, training and education, and energy retrofits."

The package does not include any broad-based tax cuts, however.

"This stimulus package is good for Canadians and it's smart economics," said David MacDonald, an economist who co-ordinated preparation of the alternative federal budget.

"Simply put, government-spending initiatives outlined in this plan provide far more job-creating stimulus than across-the-board tax cuts," he said. "People who have jobs spend; people who lose them do not."….

Meanwhile, the Canadian Centre for Policy Alternatives in November warned that even a mild recession would leave the federal government with a deficit of more than $12 billion next year and in excess of $20 billion the year after that. A major recession, it said, would put Canada nearly $28 billion in the red next year and almost $50 billion a year later….