One of the first items on Prime Minister Stephen Harper’s agenda when Parliament returns will be reintroduction of a $278 billion budget that includes a sprinkling of social and economic spending and a plan to slay the budget deficit in several years. And the government will continue with a $6 billion corporate income tax cut.

“The risks still lie outside the Canadian border, which as we’re well aware can have a spillover effect on Canada,” said Royal Bank chief economist Craig Wright.

“We’re seeing continued uncertainty and concerns still with respect to the Eurozone and where it’s headed,” he said. Uncertainty on economic growth is also being fanned by volatile energy markets and the questionable U.S. business rebound, Wright said.

Prospects for Canada are also complicated by expectations that spending by debt-burdened consumers could slow in 2011 and by the shut-off of the Conservatives’ two-year, $47 billion emergency stimulus program.

With government spending slowing, the Conservatives have staked a great deal on their view that the business community will pick up the slack and stimulate the economy with expansion-minded investments.

Besides phasing in corporate income tax cuts worth $14 billion by 2012, the Conservatives in recent years have provided a wide range of investment incentives for business, including easing taxes on small business and manufacturers. In all, tax cuts for business by the Conservatives total an estimated $60 billion by 2013.

both Flaherty and Bank of Canada Governor Mark Carney have pointedly talked about the urgent need for more spending on machinery and equipment by companies.

But many are not convinced, with some Canadians saying the government would be smarter to tie tax incentives directly to company investments to ensure that corporations don’t just pocket the extra profits.

Speaking of corporate tax cuts, Canadian Association of Social Workers spokesperson Fred Phelps said it would be one thing “if corporations turned around and invested those funds into the economy.” But he said that hasn’t been happening in recent years. “What really has driven us out of the recession,” he said, “is spending by households and government, not business.”

Canada’s rate (at this moment, 27 per cent).

As Canada trimmed, the world trimmed, too: 75 countries aggressively cut corporate tax rates in the past decade. China’s corporate tax rate is 20 per cent – discounted to 15 per cent for companies that invest in strategically important industries.

combined federal-provincial statutory tax rate of 25 per cent, won’t

The “Bowles-Simpson Plan,” proposed by President Barack Obama’s commission on fiscal reform, suggests a federal rate of 28 per cent. The Wyden-Gregg Plan, proposed by Democratic and Republican legislators, suggests 24 per cent. The China-OECD Plan, advanced by the non-partisan U.S. Tax Foundation, suggests 20 per cent

These rates are federal rates and don’t include corporate rates levied by the states: nominally, on average, 6.6 per cent; in fact, on average, 4.2 per cent. Thus a U.S. federal rate of 20 per cent (the China-OECD Plan) would produce a comprehensive “America rate” of 24.2 per cent

Canada’s goal assumed an “America rate” of 39.3 per cent: a competitive advantage for Canada of 14.3 percentage points.

when you add the federal rate and the average provincial rate (19 plus 12.5), you have a “Canada rate” of 31.5 per cent – the fourth-highest rate in the world: and twice as high as China’s most competitive rate.

The Conservative government took a lot of heat for incrementally lowering Canada’s corporate tax rate.

The steep decline in the 12-month moving sum that was produced by the recession finally turned around in early 2010, but the rebound lasted only a few months.

The graph also makes it clear that the trend to deficit began in early 2008, several months before the recession began.

The federal government’s decision to cut the GST would have produced a deficit even if the economy had remained stable.

Ottawa set a record $55.6 billion deficit in 2009-10, when the recession hit hardest, but has improved that position by between $15 and $20 billion in one year.

"However, based on the results to date, the final 2010-11 deficit is expected to be lower than the $40.5 billion as projected in the March 22 budget."

History has shown those adjustments can amount to billions of dollars in additional expenditures.

During the election campaign, the Conservatives pledged they would balance the budget in four years -- one year earlier than planned -- by finding an additional $4 billion in savings from operations.

The department said $17 billion, or about half, of last year's deficit was due the stimulus package.

In April, the International Monetary Fund pegged Canada's combined federal-provincial fiscal deficit at 4.1 per cent of gross domestic product, lower than the U.S. (10.5 per cent) and the United Kingdom (8.1 per cent).

It also features a bundle of crime bills that would be passed in the first 100 days of Parliament

The five main priorities of the campaign platform are jobs creation, supporting families, eliminating the deficit, getting tough on crime, and investing in the North.