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With all the predictions of doom and gloom coming from the austerity camp, one would think that Canada was already about to hit the famed (but never seen) "debt wall." Before we get too carried away, however, with the scary debt stuff, consider these two indicators of the fundamental fiscal fragility/stability of Canadian governments.
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In the early 1990s, CTV broadcaster Eric Malling told Canadians the sad tale of a baby hippo shot by authorities at a New Zealand zoo.
Sad, but apparently necessary, Malling suggested in a special broadcast from down under. After all, New Zealand had big deficits, so there was no money to expand the hippo pen. What was a country to do but blow the newborn hippo away?
Malling's cautionary tale, which helped pitch an austerity agenda to Canadians 20 years ago, wouldn't seem out of place today, as we're once again being urged to hunker down for lean, mean times.
For someone paid to be optimistic, Finance Minister Jim Flaherty was remarkably sombre in last week's speech to the Canadian Club in Toronto, warning about the impact of financial uncertainty on an already shaky recovery. He concluded with a tried-and-true conservative analogy, suggesting that, in turbulent times, government should imitate households and live within their means.
During a crisis, the manager of a household's finances must "make difficult choices to put your family's finances on a structurally stronger footing," Mr. Flaherty said, suggesting that finance ministers do the same. "You figure out a way to restrain your spending and ... reduce your debt."