Economics 12 Chapter Four

Alberta's April 7 budget to contain small spending increase

Link: http://ca.news.yahoo.com/s/capress/090226/national/alta_fiscal_update

Summary

This article talks about how Alberta's next budget is likely to contain both small spending increases and an overall deficit.Finance Minister Iris Evans said that Alberta will be having a deficit next year and spending will continue to rise, although not as quickly as it did when high energy revenues filled the government treasure chest. Moreover, she also warned Albertans last week that the province will rack up a $1-billion deficit this year as well - down from budget projections of a $1.6-billion surplus. In fact, this year's red ink will total $1.4 billion, according to the third-quarter update. It's the first deficit in 15 years and may grow when the province's health authorities deliver their books. Many expect the health authorities to be hundreds of millions of dollars in debt. However, the Conservative government is not replacing the fund's losses, so it will still have enough cash to follow through on a $2-billion promise to fight climate change. Lastly, Evans acknowledged Alberta's energy-based economy is tumbling into a recession after leading the country for years. She projected the province will lose 15,000 jobs in the months ahead.

Connections

Chapter 4 talks about the growth of government spending and it also mentioned that the major alternative to taxation as a source of government revenue is borrowing. The article mentioned that there will be a deifct next year, and many assume Alberta will also be in debt which will led to thousands of unemployments. These are many factors involved in increased government spending, also including the transition from a rural to urban country and the government becoming more involved in the education system and to the public. These are true for Alberta, considering there is the $22.2-billion construction program for roads and schools. Two-fifths of the entire spending in Canada is controlled by the government. So the Canadian Government has to come up with a way to slove this issue which is to either borrow money from other countries or get money through taxations.

Reflection

I believe that even though Alberta is in debt and had increased its spending. It isn't the only provinces that is in this situation. Other provinces and territories are in the same position too, such as BC. Since Vancouver is hosting the 2010 Winter Olympics, there have been millions of dollars going into that project and yet the whole country is going into recession. It will only make matter worse. So I think all the provinces should work together as a whole and figure out a solution to slove this problem and clear the debts together as a country.

Economics 12 Chapter Three

Bush government paid too much for bank stocks

Link: http://www.cbc.ca/money/story/2009/02/06/bailoutoverpay.html

Summary

This article talks about how Bush administration paid tens of billions of dollars too much for stocks and other assets in its massive bailout last year of Wall Street banks and financial institutions. Moreover, it added to the frustrations of legislators already due to the $700-billion rescue plan, known as the Troubled Asset Relief Program, or TARP. congress members approved the plan last year,but many members from both parties critized this spending decision made by President Bush and former treasury secretary Henry Paulson.The oversight panel examined 10 transactions, including to ones designed to put liquidity into the banks in hopes of easing credit. However, that money went to banks considered financially healthy but in need of capital to make loans. Two other transactions went to AIG and to Citigroup Inc. under programs designed to help companies facing serious financial difficulties. Overall, the analysts conduct the valuation study found that the Treasury used taxpayers' money to pay $62.5 billion more than the value of assets in the 10 transactions it examined. By extrapolating hundreds of institutions it is concluded that the government in effect paid $78 billion more than the value of the assets at the time.

Connections

Chapter 3 talks about the role of government in a market economy and this article could be related to the chapter very well. It talks about how Bush and the goverment are spending billions of dollars too much on stock and other company that's collapsing to help the massive bail out last year. Moreover, many believes that it is the lack of a role of the government in the American banking system that has triggered the recent global economic crisis. In the taxtbooks it also mentioned about how only after conditions did not improve during the Great Depression, did governments realize they cannot wait for the market itself to readjust and must galvanize the economy with bold fiscal policies themselves. If the government realized earlier and started different act and summit in advance, it would offer more jobs which would decrease unemployment rates. If people have a job they will eventually start spending money which will slowly increase economic growth. Another solution the textbook mentioned was how the government can intervene to help stabilize the free-market system.

Reflection

I believe that if the government took a role in the economy earlier, it would help much more than just putting out billions of dollars trying to save when's been done already. The United States is going into a deeper recession and that will definitely affect other countries as well. If governement is different country could work together and imporve different system such as trade and gobalization. It might help the world's economy as a whole. Lastly, the govenerment should have used some of the money from the billions to help the public and increase unemployment rate, because it is the most direct ways to help citizens.