Go to the Globe and Mail homepage

Jump to main navigationJump to main content

In Jim Flaherty, the business community has a finance minister that it has developed great confidence in, and affection for. (Sean Kilpatrick/THE CANADIAN PRESS)
In Jim Flaherty, the business community has a finance minister that it has developed great confidence in, and affection for. (Sean Kilpatrick/THE CANADIAN PRESS)

Flaherty steps up calls for U.S. spending restraint Add to ...

Finance Minister Jim Flaherty is ramping up pressure on the United States to quickly tackle its ballooning deficits and debt - a message he has now delivered south of the border twice since the Conservatives won a majority government.

The top priority of Prime Minister Stephen Harper and his cabinet is to trim costs and balance the books, but Canada's ultimate success or failure on that front depends heavily on the strength of the U.S. economy.

More related to this story

Experts are unsure as to what the future holds, while President Barrack Obama and Congress can't agree on a restraint plan that will soothe nervous investors.

"It's essential that we all have a clear strategy in place to ensure markets continue to have confidence in our fiscal plans - and there is no time to waste in accomplishing this," Mr. Flaherty said Wednesday in a speech in midtown Manhattan. "The health of Canada's economy - and of the world's, for that matter - depends greatly on the fiscal decisions being made here."

Speaking to the Canadian Association of New York, the Finance Minister reminded his U.S. audience of the Group of 20's pledge last year in Toronto to cut deficits in half by 2013 and put debt-to-GDP ratios on a downward trend by 2016.

It's a message that is very similar to the one he delivered to conservative legislators during a May visit to Washington. On that trip, he met with key Republicans, including Wisconsin's Paul Ryan, chairman of the House budget committee and a leading fiscal hawk.

Mr. Flaherty's visit to New York drew objections in the House of Commons from Liberal Leader Bob Rae, who accused the Prime Minister of allowing his minister to interfere in a major internal political debate of another country.

"Since when does his government become a branch plant of the Republican Tea Party in the United States?" asked Mr. Rae, in reference to the U.S. small government movement.

In his speech, Mr. Flaherty said Canada will easily meet the G20 targets and quoted from several positive reviews of the Canadian economy.

Economists stress that there continues to be a large amount of uncertainty in making projections over the coming years. For Canada, a sudden rebound in the U.S. economy would boost growth here and help Mr. Flaherty meet his government's targets for eliminating the deficit.

Conversely, stubbornly slow growth in the U.S. - or, at worst, a double-dip recession - will impact the Canadian economy and cost Ottawa in terms of tax revenue, increasing the challenge of the deficit fight.

"We look forward to a solid plan to eliminate deficits, reduce debt and create a cushion against the next global economic shock, combined with the determination to deliver results on time and as promised," Mr. Flaherty said. "It's a tall order for all of us, but it is doable. The benefits for all of us and for future generations will be immeasurable."

Some observers believe U.S. lawmakers will postpone major decisions on cutting spending and raising taxes until after the next national elections in 2012. "Time is a luxury," Mr. Flaherty said to reporters after the speech. "My experience tells me that certainly in Canada's situation I want to move back to a balanced budget as soon as we can."

Follow us on Twitter: @jslaternyc, @curryb

In the know

Most popular video »

Highlights

More from The Globe and Mail

Most Popular Stories