Declaring that the global economic recovery remains fragile, the federal government set a cautious course in this year’s budget, one that is designed to build on Canada’s growing economic strength.

“Canadians remain concerned about jobs and the economy,” said Finance Minister Jim Flaherty in his budget speech. “They know that a speedy and strong recovery is not a given.”

Budget 2010 — characterized as a “jobs and growth budget” by the federal government — has three broad strategies:

1. The deployment of $19 billion in new federal stimulus funds in year two of its Economic Action Plan to create and maintain jobs. (The provinces plan to kick in another $6 billion this fiscal year.)

2. The creation of a number of “new, targeted initiatives” to create jobs, strengthen innovation and attract new business investment.

3. The return to balanced budgets “once the economy has recovered,” budget documents say.

The federal government says measures in year two of the EAP — announced in last year’s budget — will help families manage through still difficult economic times. These include such items as $3.2 billion in personal income reductions, $7.7 billion in infrastructure stimulus to create jobs, and $2.2 billion to support communities that have been hit hard by the economic downturn.

In terms of job creation, a major part of Ottawa’s strategy is to create a climate that encourages business investment, which in turn should create jobs. Budget 2010 introduces a second phase of tariff reductions that will result in the elimination of tariffs on a wide range of machinery and equipment and industrial inputs. This should allow Canadian companies to lower their costs of production and thus to invest in new capital equipment.

Ottawa says it will eliminate the deficit — estimated at $49.2 billion in fiscal 2011 — and balance the books without raising taxes or cutting transfers to people or other governments. “We will not balance the budget at the expense of pensioners,” Flaherty said. “We will not balance the budget by cutting transfer payments for health care and education or by raising taxes on hard-working Canadians.”

Instead, the federal government says that a combination of continuing economic growth, spending restraint to the tune of $17.6 billion over five years and possibly more savings resulting from a review of government administrative functions will do the job.

“In two years’ time, the deficit will be cut in half. In three years’ time the deficit will be cut by two thirds,” Flaherty said in the budget speech. “Shortly after that, the deficit will be eliminated.”

IE