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Flaherty kicks the can


 

…the deficit-fighting measures in this budget are not aimed at fiscal prudence, but at preparing the political landscape. After all, a “structural deficit” is not a genuine economic animal. Instead, it’s a creature of politics, brought to life by our lack of political courage when it comes to tough decisions about what taxes to raise or what spending to cut, and by how much.

That’s from my insta-take on the budget, now availble online over at Candian Business online.


 
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Flaherty kicks the can

  1. "After all, a 'structural deficit' is not a genuine economic animal."

    Huh? A structural deficit is the portion of an public deficit that persists even when the economic output is at full potential as opposed to a cyclical deficit that occurs as a result of temporary economic conditions.

    The concept is of vital importance for fiscal policy makers because the degree to which a deficit is structural indicates whether, or not, current tax rates can sustain current spending. If a deficit is strictly cyclical then tax RATES are high enough to maintain current spending levels, but tax REVENUES are not do to economic conditions temporarily lowering the tax BASE>

    • I suspect what Potter meant was that a country is always going to experience cyclical ups and downs much of which are out of the government's control. However, entering into a structural deficit either implies incompetence or indifference on the part of the government to control its spending (or raise its revenue).

  2. Andrew Coyne, Jeffrey Simpson, James Travers and half of the people on this board seriously need to calm down.

    A $20 billion deficit is about 1.5% of our GDP. The federal government could run $30 billion deficits for the next 10 years and odds are have a much lower debt-to-gdp ratio than it does now.

    We could swallow $30 billion deficits with 0 (0! I MEAN 0! NONE! ZILCH! NADA!) forever into time and it will have zero impact on any Canadian's standard of living, ever.

    Seriously. Relax.

    IN A COUNTRY WITH A 1.3 TRILLION DOLLAR GDP A 20 OR 30 BILLION DOLLAR DEFICIT DOES NOT MATTER! It's the equivalant of making $100,000 next year and having a debt of $31,000 on your mortgage. And the following year making $103,000, and having $32,500 on your mortgage. Are you worse off? Is this worth hyperventilating about?

    Also: anybody who seriously argues for taking $20 or $30 billion out of the economy during a very shaky recovery is just asking for trouble. I thought Canadians were so into President Obama: did no one listen to his arguments for fiscal stimulus last spring?

    • The CAPS and !!!!'s are working, I feel calmer already.

    • Your example is seriously flawed.

  3. I honestly expected the government to try to attempt a good news/bad news strategy: i.e. here are some few major cuts or changes that are needed and show we are serious about the deficit and are still a little bit conservative, but here's some new changes or spending (or re-directed spending) that shows we are pragmatic, prudent, have our eye on the horizon and not ideologues.

    Instead, not really any of either.

    Which made me wonder, and I post this as a serious question because I honestly don't know the answer: has Harper ever made a difficult decision?

    It's a simple question but I have been racking my brain trying to think of any significant potentially controversial difficult choices decision that Harper has made in 4 years.

    Anyone?

    • Yes. When his back is against the wall. Harper will make controversial, difficult choices.

      And then the GG grants them.

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