What the federal budget does for the telecom and IT sectors

Today the Government of Canada proposed a budget for the 2009-10 fiscalyear, and it doesn’t provide great news for the tech industry.

PrimeMinister Stephen Harper’s Conservatives only hold a minority of seatsin the House of Commons, and if the other parties vote against thebudget, then the government falls.

In anutshell, the government plans to borrow money from your future tostimulate the old economy. In the old economy, generally speaking,people drive cars to a workplace and work an eight-hour shift. So thismakes cars, six-lane city roads, expressways and multiple overpasses anecessity.

The EconomicAction plan, which includes a two-year $12 billioninfrastructure program (much of which would be on construction) isperfectly understandable, given the pressure from union-dominatedopposition parties. Bridges need to be repaired and universities neednew buildings anyway, so, the line of thinking goes, why not get itdone as soon as we can and forget about balancing the budget?

It'snot entirely bad news for the telecom and IT sectors. After all, itdoes include $500 million to Canada Health Infoway to “encourage” moreuse of electronic health records, and $225 million over three years to“develop and implement a strategy on extending broadband coverage tounserved communities.” It also budgets $50 million for the Institutefor Quantum Computing.

In addition, the construction projectswould have some spinoff effects. For example, work crews need a way ofcommunicating, and ruggedized two-way wireless handsets beat whistlingand yelling over the noise of heavy equipment.

But thegovernment said today it is projected to spend some $80 billion morethan it collects over the next four years, which could bring the debtto $542.4 billion, or about $16,000 for every man, woman and child.This means down the road, the government will have to spend more oninterest, giving it less room to cut taxes and spend on other items.

Thebest thing the federal government could do to help the telecom and ITsectors would be to encourage companies to employ educated technologyworkers in Canada and to reduce travel by having people work from homeand do video conferencing where possible.

But with an accumulateddebt of this year of $457 billion (not including unfundedCanada Pension Plan and Old Age Security liabilities), the singlelargest federal spending program is (and for more than a generation hasbeen) interest payments on the debt. Increasing the debt by $60billion, while providing short-term relief, will tie one hand behindall future finance ministers’ backs and leave little room for corporatetax relief for the new economy.

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