The incredible shrinking conservative deficit - Macleans.ca
 

The incredible shrinking conservative deficit

Emphasis on ‘incredible,’ says Stephen Gordon


 

The Conservative government’s plan is to eliminate the deficit before the next election in 2015: it wants to campaign on a platform of tax cuts – income-splitting in particular – but it also knows that it can’t credibly do so unless public finances are in balance. This is the third budget in a row that has been crafted to fit this narrative, but it’s getting harder and harder to squeeze into it:

Projections for the current year’s deficit have been revised up from $19.4 billion to $25.9 billion, and forecasts for the 2013-14 deficit have been revised from $9.4 billion to $18.7. Today’s budget predict’s that the government will be able to go on to turn that $18.7 billion deficit into a surplus in the space of 24 months by letting its current strategy run for another two more years.

Apart from the self-imposed political deadline, there’s nothing special about the 2015 deadline for returning to surplus. And it may be that the world economy will finally begin to recover in earnest in the next couple of years, boosting Canadian GDP and Canadian government tax revenues. But what if it doesn’t? Will the Conservatives be forced to abandon their strategy of simply holding the line on nominal direct program spending and make deep cuts? Or will they have to re-think their 2015 campaign strategy?

The Conservatives can’t keep kicking the can down the road: they’re starting to run out of sidewalk.


 

The incredible shrinking conservative deficit

  1. The Harper Conservatives have an ace up their sleeve for reaching a balanced budget by 2015: they can simply cook the books. It wouldn’t be Flaherty’s first time. Back in 2003 while finance minister in ON, he said a $5.6B structural deficit was a balanced budget.

    Now with the Budget Officer out of the way, the Harper Government can keep all public budget documents from the public without worry of lawsuits or bad press. It can also sell off billions in public assets to make a big deficit appear like a surplus.

    • They can also auction off public assets (e.g., national parks, the CBC). That was the Harris Cons’ plan for disappearing the Ontario deficit if the voters hadn’t kicked them out.

    • The correct term is crooking the books

  2. heck, you can’t credibly adopt income splitting under ANY circumstances.

    • Definitely. Income-splitting is a social-con boutique tax cut. It favors families with a stay-at-home moms. That means families that have two working parents have to pay higher taxes and pull the weight of the Father-Knows-Best set.

      This is a great opportunity for the Liberals. They can turn the tables on the Cons by coming right out and saying economists hate these frivolous tax expenditures. They do absolutely nothing for the economy. It’s time to design the tax system to bolster the creation of value-added industry and jobs and stop playing politics with the economy.

      • How sure are you that the current situation doesn’t unfairly disadvantage families with stay at home moms? Much like the Liberals long promised government daycare would to a degree have paid working parents out of the pockets of one working spouse families.

        • If that problem exists, then spend the taxpayer’s $ on giving moeny to stay at home moms across the board, not to the extent their husband’s income outpaces their own. It’s the complete opposite of needs-based-planning.

  3. I suspect part of the cooking of the books is front-loading a lot of expenses. Take 2012-13, there was a story that they were booking a $2.4 billion expense for nuclear liabilities in 2012-13. Ok, looks like the deficit is higher than expected, but that expense is a one-off, so you’re still roughly on pace with where you thought you were last year.
    Put another way, for the first 10 months of 2012-13, the feds have run a deficit of $14 billion, which would have them pretty close to their 2012 estimate. Now, maybe the really incurrred an extra $12 billion in expenses over the last two months, but I wouldn’t count on it. (Ironically, the fiscal monitor, with the $14 billion number for the first 10 months came out in the middle of the budget speech)

  4. It’s at least enjoyable to see that phat faced phuckin’ freak’s head bloat up. Hopefully it pops sooner rather than later.

    If it had been a Liberal, they would have claimed it was their vile god that had brought judgement down on him.

    • I get it. You don’t like Flaherty. I’m no fan either.
      But the name calling is unnecessary and juvenile.
      Let’s raise the level of debate and decorum – this isn’t the House of Commons

  5. It is such a pleasure to see a federal government that has, as it`s goal, a balanced Budget. I think there will be sufficient bounce back in the overall economy to achieve that in the next couple years.

    The contrast to that responsible fiscal approach is the wild and reckless spending by the Ontario gov`t in the past few years. While the Federal Conservatives talk about spending money on useful training programs etc.while balancing the books, the Provincial Liberals try to cover up years of pi$$ing away tax dollars helping their friends while the Province teeters on the edge of bankruptcy.

    • They have the goal of balancing the budget after inheriting a $14B surplus which they turned into a massive deficit with $44.4B/yr in reckless tax cuts?? How noble of them! And the mess they are making by taking a chainsaw to spending and downloading huge costs onto the provinces will be totally worth it! Canadians are so fortunate they had a party they didn’t vote for make a huge mess of the books and the government!

      • Lets not forget dumping heath care tough on crime costs to the provinces.

        • Yeah, talk about downloading to the province. The CPC tries to make hay on that while doing far worse.

          At least Martin had a reason for downloading health costs that made sense, which is to say he dealt with the windfall situation of the 50-50 funding that was leading the provinces to increase their health budgets without consideration of efficiency.

      • As some people said at the time one thing the GST cut did was reduce costs for low income Canadians, which other tax cuts couldn’t do. It wasn’t an economist’s tax cut but a populist one and I think good populism. Harper has done a lot to disillusion people but after the effect of the GST and unfulfilled promises to end it on the trust in federal government, for the conservatives to promise and deliver a reduced tax in the economic situation we had was a good thing.

        A chainsaw to spending that sees a much improved transfer to the provinces and overall federal spending that is reduced only in comparison to the growth of the GDP, is not. How much of the good, but overestimated in that respect, fiscal situation the Liberals had depended on squeezing the provinces? I definitely can’t agree that the Conservatives are both hurting the provinces and tossing away a Liberal surplus which leaned on the provinces in a better economy.

        • The GST cut didn’t do one helpful thing for low income Canadians, how can you even repeat that without shame?

          Low income Canadians receive more in GST rebates than they spend on the GST, either before or now. There is no credible argument to make here. The facts completely contradict your claim.

          The vast majority of the tax “savings” from the GST went to people buying new homes, fancy cars, yachts etc and services ranging from accountants to gardners, maids, pool boys etc.

          In other words the vast majority of the money was given away to people who could afford and were already puchasing those things.

          As virtually EVERYONE said at the time, income tax cuts would’ve been far more effective and wouldn’t have left such a hole in our federal finances.

          • I was going by what people had argued before, please don’t assume people are essentially lying if they get something wrong. And it is entirely mistaken only if the more GST back in rebates threshold goes all the way to the income tax threshold.

            Considering the experience of the effects of luxury taxes on the livelihoods of people involved in the sectors hit with the tax, the GST cut is still a demand-side job creator comparable to a probably less efficient job creating government spending program. In that sense, probably only relatively less useless (if you disregard respect for government) although that would depend on your opinion of “demand-side”.

            *edit* The effect of a reduced income tax on lower incomes above the income tax line wouldn’t be more than a GST reduction until there was enough taxed income for the lower cost to outstrip the reduced GST paid above the rebate line. That might go quite a way, it depends on how far the rebate also goes. Since the higher amount of any income tax cut is saved by the highest incomes as well, and the correlation between a “demand side” GST cut and job creation is at least more apparently direct than for an income tax there really is a better case than we’re hearing for the GST cut. I wouldn’t take it economically over an income tax cut at all, but unless an income tax cut included an actual “workfare” type rebate itself I think it does have a social/economic positive side other cuts don’t.

        • Well.. obviously we need to put our trust in “some people” rather than people who are educated or know what the hell they’re talking about.

          The new world folks. If you don’t like the facts as they are, go find someone who’ll tell you they’re something different and then it’s all just fine.

      • What a “huge” mess they’ve made of the books. One of only a few countries with a AAA credit rating, best fiscal position of any G7 country. Oh, such a mess!

        • Enron had a great credit rating too..
          ..until it didn’t.

          • Are you accusing the federal government of fraud? If so, what evidence do you have to support your accusation?

          • Given that even the PBO has to sue to get information about the books from this government, no hard evidence. But, as has been said, absence of evidence is not evidence of absence.

            What I do have is the precedence of Flaherty.

  6. The dumb Christians you guys helped in power claim not to want healthcare funding now. They are stupid hypocrites.