Harper's tax cuts hurt coffers during recession

CANADA - Prime Minister Stephen Harper confirmed today he would use millions to help out hard hit Ontario , but Harper's ability to respond to the crisis has been undercut by his own government's record of tax cuts, which has emptied federal coffers, the parliamentary budget officer concluded in a report released yesterday.

Budget officer Kevin Page concluded the federal Conservatives are likely to run budget deficits "in the near term," possibly beginning this year, and that the fault lies as much with Finance Minister Jim Flaherty as it does with the weak economy. Page's report projects a budget deficit of $3.9 billion in 2009-10. But it adds that, if the economic downturn proves worse than expected, next year's federal deficit could hit $14 billion.

Page says the deterioration of the federal government's financial picture in the first nine months of 2008 is not so much the result of the weakened economy as Flaherty's policies, particularly the latest reduction in the GST and reduced corporate income taxes.

In his opening speech to the 40th Parliament, Harper pledged to make federal regional development funding available to high unemployment communities in southern Ontario for the first time. But he was sketchy on details such as how much money the Conservatives will commit or when funds might be delivered.

The government is hampered by a weak financial picture and its own dwindling coffers, which will be laid bare when Flaherty delivers his fall economic statement to Parliament next Thursday.

Harper defended his government's policies, denying his goals was just to give tax cuts to the rich. Over the past 18 months, the Conservatives have shown a distinct preference for corporate tax cuts rather than new direct spending on social or economic programs by Ottawa.

Harper has also remained mum on whether Canada will help General Motors, Chrysler and Ford plants, which are currently warning they may go bankrupt. If the US bails out the automotive industry but Canada does not those companies may go south of the border permanently.