Harder on the Fiscal Brake

With rare political courage and good economic sense, Canada has been fighting inflation with fiscal measures first. Last fall, mild credit restrictions were imposed on most consumer goods. They were not enough. The cost-of-living index climbed from 172.5 to 175.2 in January.

In the House of Commons last week, Finance Minister Douglas Abbott announced a further fiscal tightening up. Chief items: 1) a hike in the minimum down payment on most consumer goods from one-fifth to one-third, on automobiles from one-third to one-half; and 2) a cut in the maximum credit period for installment buying from 18 to twelve months. The new restrictions are tougher than those imposed in the U.S. (where installment payments may extend through 15 months). They are also tougher, in the case of automobiles, than the Dominion's own rules at the height of World War II.

Despite insistent opposition demands for price and wage controls, the government stood by its argument that full controls probably would not work except in a full war emergency. When he presents the budget next month, Abbott is expected to maintain revenues well in excess of need (1951-52 estimates: $3.58 billion) and thus take more money out of circulation. He may also reinvoke the compulsory savings scheme used in World War II. Only if the fiscal brake fails will wage and price controls be tried.

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