Government fiscal policies direct taxation and government spending to influence and stabilize the economy. Government actions could include: cutting or raising taxes, increasing spending, maintaining human capital by providing re-training incentives, reforming transfer pricing regulations, and keeping pace with electronic commerce.
The federal government can cut taxes or implement policies to control deficits and strengthen the economy. However these actions can result in surpluses - taxes collected but not spent. When surpluses occur, some people believe that the government should increase spending on social programs (such as education and health), rather than paying off any outstanding national debt.
If interest rates remain low and deficits disappear, the cost of paying off the national debt, and its associated interest, will stabilize (be predictable from year to year). Smaller interest payments leave more money in the government coffers. More money is available for cutting taxes and restoring public services.
Maintaining human capital means keeping managerial and technical talent in the country. Money spent educating people benefits our economy only if those people remain in Canada. Providing incentives (such as lower taxes) for skilled people to remain in Canada is one part of a fiscal policy that may enrich the economy.
Tax rules and credits differ from one country to another. Canadian transfer pricing regulations adjust the prices used to transfer goods and services to other countries. This can encourage multinational businesses to remain in Canada, and help stabilize our economy.