The CEO Poll: Budget advice
Joe Castaldo
Canadian Business Online
January 16, 2009
Canadian business leaders say government spending could mitigate the recession.
By Joe Castaldo Joe Castaldo is a staff writer for Canadian Business. He joined the magazine in January 2007 and has written about a variety of topics, including management issues and investing. For Canadian Business Online Joe writes about clean technology — companies, tech developments, and environmental policy and investing. More stories by this author >>
The 140 CEOs who responded to the survey are slightly more inclined to believe that central banks are more effective than governments when it comes to aiding the economy through liquidity injections, and that they treat regions and sectors fairly without politics entering the situation. (The panelists’ faith in central banks is dipping, however, as reported last week in another COMPAS poll.)
But governments are still crucial, according to the respondents. “The government needs to take a strong leadership role in making the economy the absolute priority right now,” wrote one respondent. “The opposition parties should realize that this issue is larger than their petty bickering and should support the recovery plan.”
A slim majority of the panelists (52%) believe the best way to prevent the economy from tanking further is for the government to spend heavily. Infrastructure investment is expected to play a large role in the upcoming federal budget, and the CEOs provided guidance on how to do it correctly.
Most of the CEOs say government should first fix what’s broken before committing money to new projects. This ensures work can begin immediately and the economic benefits will be felt sooner. The respondents also believe workforce training should be an integral part of any spending plans, and that infrastructure spending should be phased in over a long period of time. Finally, constant evaluation is necessary to ensure projects meet the previously stated goals. “Accountability for each project is key,” according to one respondent.
But not every respondent was thrilled at the prospect of boosting spending. “It is not wise or possible to try to drink yourself sober. The developed world needs to develop an instinct to save, not feed a desire to spend,” wrote one business leader.
Government spending can actually make matter worse, according to 40% of the respondents. It can lead to lower spending tomorrow, increased taxes and debt default.
“Any debt incurred to spur the economy should be as a result of corporate and personal tax cuts. Let the marketplace decide the winners and losers,” one respondent wrote. “Corporate bailouts in any form are simply bad business. Governments need to let people keep their hard-earned dollars and get the hell out of the way.”
Other respondents suggested cutting taxes is more effective than government spending. “We should be reducing taxes, not increasing spending. Eliminate the GST. That way, it spurs spending,” wrote one CEO.
“We will have a very difficult time paying our corporate tax this year as earnings were good in the first part of the year, but cash flow has all but stopped in the last few months. A tax deferral would be most useful,” wrote another.
Still more respondents offered novel ways to mitigate the effects of the recession, beyond investing in infrastructure. “Nobody is talking about the most logical short-term measure. Help should be given to present China exporters to expand into more markets there ASAP. China is the biggest importing economy in the world,” wrote one respondent. “China offers a golden opportunity for Canadian innovators to help pull us out of this recession.”
Others recommended investing more in post-secondary education, and one even suggested the construction of a high-speed electric train across Canada that would “put people and equipment to work and leave a lasting legacy for efficient travel.”
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