Shot in the Arm

Canada, a nation envied by the world for her brimming postwar budget surpluses, sprang two startling fiscal surprises last week. For the first time in nine years, red ink appeared on the national budget and a $160 million deficit was forecast for the year ahead. But instead of belt-tightening to make up the shortage, Canada launched a bold tax-reduction program, slashing personal and corporation income and excise rates to put more money in circulation and give the country's economy a judicious shot in the arm.

Members of Parliament, troubled by increased unemployment and last year's business decline, happily thumped their desks as Finance Minister Walter Harris read from a top-secret budget notebook the details of his pump-priming tax cuts:

P: Reductions up to 13% in personal income-tax rates. Example: a married man with two children, earning $4,000 a year, will pay $235 instead of $269 (v. $717 in Britain, $240 in the U.S.).

P: A 4% reduction in corporation taxes, lowering the rate from 47% to 45% (present U.S. tax: 47%).

P: A cut from 15% to 10% in the automobile excise tax, reducing retail prices on most models by $100 or more.

Most Canadians approved the decision for deficit financing, and some even thought that Harris should have gone farther, making deeper tax cuts even if the deficit ran up as high as $500 million. Harris' confident answer was that pump-priming on that scale is unnecessary. Although winter unemployment has been high, there are many signs of a sharp spring upswing in business. Above all, the U.S. economy, on which Canada depends heavily, is booming. "We're not in a depression and there's no sign of one coming," Harris said emphatically. "I expect to break even very soon."

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