Chapter 8 - Stablization Policy

Article: http://www.canada.com/vancouversun/news/editorial/story.html?id=f58adc96-45fd-4936-a0b3-fbaa3b7200ed

Almost 38 percent of Canadian’s tax dollars were going towards the huge national debt, but it is not enough. Canadian workers and businesses have been reducing the national debt by $54 billion in a decade. This deduction comes from the surplus of the Employment Insurance fund. Many employers and workers have complained about the payroll deduction on employment insurance as another form of tax rather than an insurance fund. At last in February, the Conservative government ended this practice by making employment insurance as a crown corporation. During recession when more workers are unemployed, the demand for the premium is going increase. The Actuarial Institute of Canada says that a fund of 10 to 15 billion dollars would be enough to avoid significant changes in employment insurance rates.

This article is relevant to chapter 8 because of Employment Insurance. In this chapter we learned that Employment Insurance is an automatic stabilizer. It is there to help stabilize the economy when individuals become unemployed and their income becomes zero. As a result their spending is zero and it decreases the level of spending. Instead of using the Employment Insurance to increase spending, the government is using it a form of taxation to reduce the national debt.

I think it is a smart idea for the government to use the surplus from Employment Insurance to decrease the national debt. Not only does it serve as insurance for workers when they are unemployed, it also serves as a line of credit for the Government of Canada. The money can be used during recessions or catastrophic events. It may seem unfair for workers to pay for a premium that repays the national debt, but it has to be paid in some form or another. This would be the best way for the government to use the surplus money wisely.