 Canadian Prime Minister Stephen Harper at 24 Sussex Drive on December 18, 2007. (Sun Media/Blair Gable)
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OTTAWA - Prime Minister Stephen Harper is warning Canadians to brace for fiscal belt-tightening as a looming economic collapse in the U.S. threatens to make waves north of the border.
Looking to an uncertain 2008, Harper signalled his Conservative government will save for rainy days ahead by foregoing sizeable tax cuts and keeping a tight grip on federal purse-strings in the next spring budget.
"What we do not expect is that we'll be throwing billions of dollars of new spending or long-term spending and big tax reductions in the upcoming budget. Those are not financially realistic scenarios," Harper said in a year-end interview with Sun Media.
Canadians are in fine spirits thanks to current prosperity and high employment, but the PM cautioned the good times won't last for long.
The government used up all its "fiscal room" in the fall mini-budget, which knocked another point off the GST and offered broad-based tax cuts for families, individuals and businesses.
"We did it very consciously. We didn't wait for the spring. We were concerned about the American economy and we thought we had to act quickly," Harper said. "We don't have big additional fiscal room now and there's nothing that's going to cause us to have big additional fiscal room between now and the spring, because even if things go reasonably well, they're not going to go so well that we're going to find ourselves suddenly overflowing with money again."
The Conservatives won't repeal any of the tax break goodies already promised, as they are "stimulative measures" meant to help weather the economic storm. Instead, the feds will behave like any household or business facing a financial crunch, exercising spending restraint and reducing the debt load, Harper said.
Under fire for being too lax on the climate change file, Harper also served notice that cutting greenhouse gas emissions will carry a hefty price tag. His plan for meaningful, mandatory reduction targets will translate into economic opportunities over time, but is bound to pack a punch in the short term.
"There will be some squawking, and there will be some people saying they go too far," he said.
As the prospect of a federal election looms on the horizon, Harper is unfazed by threats to topple his Conservatives. If the Opposition parties play a game of chicken, he will continue to govern while preparing to run a fine-tuned campaign.
"I promise you this: If we are brought down, we will be more ready than the parties that bring us down," he said.
