PM tells Canadians U.S. financial collapse looms

[Stan]

PM tells Canadians to tighten their belts as U.S. financial collapse looms

By KATHLEEN HARRIS, NATIONAL BUREAU

OTTAWA -- Prime Minister Stephen Harper is warning Canadians to brace for fiscal belt-tightening as a looming economic collapse in the U.S. threatens to make waves north of the border.

Looking to an uncertain 2008, Harper signalled his Conservative government will save for rainy days ahead by foregoing sizeable tax cuts and keeping a tight grip on federal purse strings in the next spring budget.

'NOT REALISTIC'

"What we do not expect is that we'll be throwing billions of dollars of new spending or long-term spending and big tax reductions in the upcoming budget. Those are not financially realistic scenarios," Harper said in a year-end interview with Sun Media.

Canadians are in fine spirits thanks to current prosperity and high employment, but the PM cautioned the good times won't last for long. The government used up all its "fiscal room" in the fall mini-budget, which knocked another point off the GST and offered broad-based tax cuts for families, individuals and businesses.

'CONCERNED'

"We did it very consciously. We didn't wait for the spring. We were concerned about the American economy and we thought we had to act quickly," Harper said.

"We don't have big additional fiscal room now and there's nothing that's going to cause us to have big additional fiscal room between now and the spring, because even if things go reasonably well, they're not going to go so well that we're going to find ourselves suddenly overflowing with money again."

The Conservatives won't repeal any of the tax breaks already promised, as they are "stimulative measures" that will help weather the economic storm.

Instead, the feds will behave like any household or business facing a financial crunch, exercising spending restraint and reducing the debt load, Harper said.

TOO LAX

Under fire for being too lax on the climate change file, Harper served notice that cutting greenhouse gas emissions will carry a hefty price tag.

His plan for mandatory reduction targets will translate into economic opportunities over time, but is bound to hurt in the short term.

"There will be some squawking, and there will be some people saying they go too far," he said.

As the prospect of a federal election looms, Harper is unfazed by threats to topple his Conservatives. If the opposition parties play a game of chicken, he'll be ready.

"I promise you this: If we are brought down, we will be more ready than the parties that bring us down," he said.

'GRINCH-LIKE'

John Williamson, federal director of the Canadian Taxpayers' Federation, said Harper's message of no big tax cuts is a "little Grinch-like."

"I would think as an economist, and as a fiscal conservative, the prime minister would recognize that if, in fact, we're moving in to a slow-down period, this is the time to cut taxes -- to lower the cost of doing business or to take some pressure off family budgets," he said.

"Before the PM starts talking about doom and gloom, he should reduce Ottawa's spending level rather than telling Canadians they have to do more with less."

[CyberGuy]

A slowdown definitely but a meltdown. NO WAY. The Fed expects a slowdown to about 1 to 2 percent economic growth with about 4.5 percent inflation. But no recession. Not yet anyway. The housing market crunch has hurt us but not stopped our economy.

[Stan]

It will be interesting to see how this plays out.. I read in the USA today, and posted it here a couple of years ago, that the Federal Debt was close to $1,000,000 per family. I also read in another place that most of the debt is being financed by Asia, ( read China).

I really wonder what the truth is...

[Neil D]

NPR and a few other places have stated as such. Plus, China has bought into Goldman Sacks for 10% of the stocks to help bulster thier sagging stock return and to offset some of the secondary or subprime loans they have talked about in other places.

Or something to that effect.