Here’s some Canadian politics for you.
Way back in 2009, various government bailed out the North American automakers because of the declining sales and the recession that was brought on during the US government of George W. Bush. Instead of the standard Here is some cash to help you out even though we may not see it again, the government took shares in the automakers.
Fast forward to this past week. The Canada government was the last government to still have shares – in this case General Motors – and decided to cash in their shares.
It was a nice chunk of shares because it netted the government somewhere around $3.3 billion. Problem is that they spent $4 billion in 2009 for the shares. So the government actually lost around $700 million.
So you may be asking why the Canadian government cashed in those shares now.
Well, they needed the cash to have a balanced budget.
Sounds a bit odd but with the barrel of gas cut in half since this time last year, the government is losing money because it receives revenue from the sale of gas as well as the job losses that are happening in the gas industry in Canada. Since that revenue isn’t coming in, they can’t balance the budget [expected within two weeks] without selling their shares in GM.
To add to this, the government has announced that no future government can have a deficit in their budget.
Sounds a bit odd and will be hard to keep a promise considering the government was tens of billions in deficit in 2009 for trying to prop up the economy. [But I think there will be an exception for cases such as that.]
Even still, to sell off shares at a major loss to claim to have a balanced budget. All this coming just months before an election in mid-October.
Once the budget is read in a couple of weeks, the Harper government can proclaim though out the election campaign and the months prior during the “fake” election campaign that they had a balanced budget.
I think anyone who follows politics well will know that they only had their precious balanced budget because they sold off shares for a loss.
[And unlike a taxpayer, you can’t report it on your tax form as a capital loss if you are the government.]