Next year is looking bleak for the economy, and many forecasters predict a deepening global recession. Economists at Scotiabank, for one, believe most developed countries will see next to no economic growth until 2011 at the earliest. But in the face of this dark economic news, Canadian CEOs have some advice for government, provided in a recent poll conducted by COMPAS Inc.
The most important policy action for mitigating the damage of a recession is for the central bank to keep interest rates low, according to the respondents, followed by increasing spending on transportation and other infrastructure projects. “The general public has accepted the fact that deficits will run at all levels,” wrote one CEO. “Under normal circumstances, it would be difficult to spend monies on infrastructure, but it will be acceptable.”
Cutting personal and corporate income taxes were also popular options with the CEOs. “Consumer spending is the pump that will drive us out of the current chaos. Money needs to be left in the hands of taxpayers, and not redistributed to failing companies and enormous financial institutions,” wrote one respondent.
The CEOs were generally not in favour of bailing out automakers. Slightly less than 45% of the respondents endorsed a bailout in the survey, which was conducted before Ottawa and Ontario announced a $4-billion aid package.
“An auto industry bailout is history waiting to repeat itself. The government will bail them out, and the results will mirror the enormous success of British Leyland,” wrote one respondent, referring sarcastically to the U.K. automaker that went belly up after a long decline starting in the 1970s, despite government assistance.
A few of the CEOs appeared to have little faith that federal and provincial governments would take the necessary steps to help the economy, however. “I grow weary over the fact we have too many politicians who continually shoot from the hip and point fingers on economic matters without having a solid understanding of economics,” wrote one.
Yet another pointed to a perhaps overlooked player in all of the economic gloom: “The media is fueling uncertainty.”