'Take a breath': An economist's advice to the Liberal government
An independent economist who met with the premier and finance minister this week has a host of ideas for how the Liberals could navigate the fiscal crisis, but David Thompson says there's one overarching theme to his research.
"I think the biggest recommendation was, take a breath," Thompson told CBC Radio's The St. John's Morning Show.
"It's not an emergency that needs a panicked, hasty solution."
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The B.C. based economist, who works with PolicyLink Research and Consulting, was commissioned by the Newfoundland and Labrador Federation of Labour to study the province's economic situation.
Beyond keeping a calm front, Thompson advised the Liberals should look at raising taxes, running short-term deficits, and consider the impacts of job cuts.
To tax, or not to tax
Thompson said he didn't recommend any one specific tax hike, but said there are four main options: raising corporate income taxes, personal income taxes, the HST or instituting a carbon tax.
He said that if Newfoundland and Labrador raised those taxes to the level of neighbouring provinces, and also brought in a carbon tax, it could do a lot to help the province's finances.
"[They] could raise about $800 million, which takes us almost halfway to being through that deficit," said Thompson.
I think they're actually ready for action ... and frankly, I think it's probably time to get going.- David Thompson, economist
Thompson said that figure could be accomplished by bringing the province in line, tax-wise, with the rest of Atlantic Canada.
Thompson advised running a short-term deficit to stimulate growth, and when the economic situation recovers, Thompson said that extra tax revenue could be saved for a rainy day.
He said that hasn't happened in the province's recent past.
"Unfortunately, a lot of tax cuts were put in when oil was at $100 a barrel. And the province has running deficits with oil at $100 a barrel, and that's pretty irresponsible," said Thompson.
Keep people working
Thompson said there could be serious impacts in both the public and private sectors if the Liberals' plan to trim department spending by 30 per cent is realized.
He estimated that would mean about 30,000 jobs lost.
"And that doesn't count all the jobs that are lost when those people stop spending money locally," said Thompson, estimating that spinoff could cut another 10,000 to 20,000 out of the workforce.
"I think with that scale of cut, you're looking at coming into a second and deeper recession."
Thompson said his ideas were met with openness by the premier and finance minister, but ideas are only one part of climbing out of the economic crisis.
"I think they're actually ready for action," said Thompson, "And frankly, I think it's probably time to get going."