Should Canada run modest deficit to help job growth?

“A new report issued by the C.D. Howe Institute says the federal government could create tens of thousands more jobs in the next three years if it stopped worrying so much about a tiny deficit and decided in favour of some stimulus spending,” a Canadian Press article wrote. The article posted on CBC News’ website yesterday continued, “The report written by McMaster University economics professor William Scarth argues that keeping the deficit at 0.5 per cent of GDP for the next three years could lower the unemployment rate by 0.4 per cent. That would amount to about 75,000 additional jobs if the increase in government spending were done efficiently, such as on infrastructure. Coincidentally, the Canadian economy has created only 72,000 jobs over the past 12 months. The report notes that such a change in strategy would mean keeping the federal deficit at about $10 billion over those three years, but Scarth argues that is insignificant economically because it would mean missing the stated target of reducing national debt-to-GDP to 25 per cent by 2021 by a single percentage point.” Read the full article here.

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