These estimates ignore other forms of government obligations, such as commitments to pay government pension plans and senior's benefits, and fund health care, both of which will increase as the population ages. Public expenditures must be reduced further so that in the future the government will have the fiscal flexibility to pay for unexpected emergencies and programs as the need arises. In turn, the higher rates will erode our ability to pay for future social programs. Financing costs are already diminishing the funding available for program spending. Spending cuts alone are not enough.
Tax cuts are also necessary.
Despite recent tax freezes and some minor cuts, taxes are still well above historical norms. Tax cuts increase economic growth and create jobs by lowering both the cost of doing business and the price of goods and services. Tax cuts also increase the incentive to work, discourage the migration of highly skilled labour to countries with lower taxes, and diminish underground economic activity. In an increasingly global economy, tax competitiveness is more important than ever. Only by reducing taxes can our rates be competitive with those in the U.S., which will inevitably encourage new firms to locate in Canada.