Financial Report of Canadian Government

http://www.fin.gc.ca/afr-rfa/2009/afr-rfa09_1-eng.asp#highlights


Summary

In the fiscal year of 2009-2009, the Canadian government reported deficit of $5.8 billion comparing to the “budgetary surplus of $9.6 billion in 2007-2008”. The huge leap was caused by the worst global recession since World War II. Global recession resulted in a decrease of $9.3 billion or 3.8% from 2007-2008 on Canadian government revenue. The most significant descending figure of revenue was corporate income tax, which decreased by 27.4%. Recession stroke Canadian business hard and businesses were having a hard time to sustain their operations. On the other hand; although payment toward public debt has descended by 7% due to low interest rate, federal government expenses escalated by 2.6%. Funds were directed to Canadian Economics Action Plan, which was introduced in 2009 to improve the economy. For example, money was spent to enhance EI benefit to help the unemployed and support the “financing for Canadian households and business” like renovation tax cut. Moreover, by injecting immense infrastructural projects, government created more jobs in constructional areas.

Connection

The importance of government intervention is emphasized in both Chapter 3 and Chapter 4. During these hard times, people feared to spend their money; therefore they tended to save all their money for further use. Fewer transactions will mean a severer recession- Depression. Governments had to step up and initiated different economics plan to stimulate financial activities. For example, the support of “financing for Canadian households and business” were tax credit which encouraged consumers or business to spend their money in different products or services, so that the economy can rehabilitate faster. Other than tax credit, federal government also spent money on EI benefit. The unemployed could sustain their lives with these EI. Without government intervention, unemployed would be suffering from these crisis and free-market system wouldn't be able to take care of them. Political instability could be detonated because lack of support for the unemployed.

Reflection

Personally, I think the Canadian government takes care of citizens too much that to a certain extent we are handicapped. Different social welfare programs and EI has been directed to help unemployed and low-income people. These created an incentive which prevents people from working. If they are getting paid and taken care by the government, why would they find jobs to sustain themselves? In addition, people have get into a habit of complaining the government. Government should educate people how to save and spend properly. They can impose strict saving rules which withdraw portion of their income instead of paying income taxes. This money will then be given back to tax payers in a certain period of time. I am also suggesting that less money should be spent to social welfare programs. Surplus can then be spent in different areas like public transportation and renewable energy to enhance Canadian’s competitiveness in the world. More investment in Canada will result in greater economy in Canada and all can be benefited from it.