Public deficit: between shining federal figures and bitumen bubbles

Isn’t it time to start counting all of our public debt?

As of November 2012, almost three-quarters of the way into fiscal 2013 (April 1, 2012 to March 31, 2013), the federal deficit stands at $12.4 billion, Finance Department said today. That’s quite a bit below the $15.5 billion shortfall recorded over the same period last year.

Given these year-to-date figures, it’s reasonable to expect that federal deficit for the year as a whole will come in under the $26 billion the Harper government predicted back in its November fiscal update. Sonya Gulati, at TD Economics, for one, expects a $22 billion deficit. In a note to clients this morning she even predicted that “the government’s 2016-2017 deficit reduction timetable could be reasonably be brought forward by one year.”

That’s still not enough to balance the budget by the next election, which will probably happen in late 2015, as the prime minister would like, but it’s far better than what most provincial premiers can say.

It certainly stands in stark contrast with Alison Redford’s “bitumen bubble” speech yesterday.

Lower than expected prices for Alberta’s oil are leaving it with not enough cash and too much of the icky black stuff.

“This bitumen bubble,” she told Albertans in a taped video clip last night, “means the Alberta government will collect about $6 billion less in revenue this year alone.” That’s how much the province spends on education every year, she added.

That will likely be the $3 billion deficit Redford already expects for fiscal 2013, a shortfall that was originally estimated at only $800 million.

The trouble, as you probably know (if you don’t read more here), is that without a convenient and fast way to deliver Alberta’s oil to where it’s needed, the price of Canadian heavy crude is dropping and the spread between it and world prices widening to record levels. As the Bank of Canada noted this week, lower resource royalties will leave provincial governments cash-strapped—and not just in Alberta.

But energy market woes are only part of the problem when it comes to Canada’s provincial coffers: it is Ontario’s credit rating, after all, that’s on the line, not Alberta’s (at least for now). But the more serious, long-term problem for resource-rish and resource-poor provinces alike comes from swelling ranks of seniors and low replacement rates.

Just a few days ago Kevin Page, Canada’s top budget watchdog, reiterated that Ottawa had better start producing periodic analyses of long-term deficit and debts of all layers of government, something the auditor general also recommended.

That seems like a mighty good idea.

 




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Public deficit: between shining federal figures and bitumen bubbles

  1. 1980s bumper sticker

    ‘Please God let there be another Oil Boom. I promise not to piss it all away next time’

    Yeah, riiiiight

    • 2013 Bumper Sticker

      In Wine There is Truth. In Beer There is Strength. In Emily There is Bacteria.

      Right on!

  2. What this really points to is what a poor fiscal strategy it is to make critical public services such as health and education dependent on spending cyclical resource revenues.

    Instead of depleting its principal to lower taxation Alberta (and Canada) ought to be investing the resource revenues and drawing on the earnings (ala Norway) in perpetuity.

    All they have succeeded in doing is creating an artificially low tax environment that overheats the boom cycle and then fails to pay the bills during the bust.

    • Never spend your principal.

      Don’t eat your seed corn.

      They used to be commonly known financial rules. Not anymore I guess.

  3. Lower than expected prices for Alberta’s oil are leaving it with not enough cash and too much of the icky black stuff.

    Let me see if I can identify the problem since the politicians, left, right or media refuse to do a proper analysis.

    Lets start with the wild-west attitude towards approving project without thinking.

    A totally arrogant attitude to what the Alberta government could tell other countries and provinces to do.

    No upgrading in Alberta, absolutely astoundingly stupid.

    A tax regime that puts all the market/monetary via a ridiculous taxation scheme on Alberta citizens, or should I say right out of their pockets.

    Last but not least, the fact that Alberta has had the least fiscally competent government, excluding Quebec, for the past 30 years.

    See left, right, politician and media, its just that simple.

    • Wow….I’ll agree with ALL of that.

  4. Alberta’s bitumen is now experiencing the ‘sealing’ effect. Its price and market-share is dropping due to how it is perceived by everyone but the local population. For Alberta’s economic sakes I hope greater royalty revenue can be derived from the resource but its realities shouldn’t be ignored by merely increasing capacity.

    Alberta needs to look more deeply into why its product isn’t selling other than undercapacity. If you’d listen to a Newfoundlander describe sealing you’d probably think it was the most eco-conscious/eco-friendly way of using an animal – but environmental groups have managed to ban seal-products around the world. Alberta needs to look at that example and work on improving its image before the same fate befalls it.

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