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What if it doesn’t go as planned?

Flaherty projects five years of about five per cent growth


 
What if it doesn’t go as planned?

Photograph by Sean Kilpatrick/ CP

Everything in Jim Flaherty’s 2010 budget hinges on his forecasts. The finance minister’s plan to shrink the deficit from a staggering $49.2 billion this year to a pesky $1.8 billion in just five years depends on steady economic growth. He’s often challenged for projecting five consecutive years of growth of around five per cent, including inflation. But Flaherty has a great comeback: he’s using the average of 15 respected private forecasts. He’s been known to rhyme off the forecasters’ names, as he began to in question period last week—“TD Bank, BMO, CIBC, RBC, Scotiabank…”—before the Speaker cut him off.

That roll call, though, may sound weightier than it really is. Of those 15 firms, Flaherty’s department told Maclean’s, six don’t attempt to project as far out as 2013-14 and 2014-15—the crucial years in his deficit-busting narrative. Of the remaining nine, some are less than ringingly confident about the numbers they offer. Take BMO Capital Markets, whose outlook is a touch more optimistic than the forecast average used in the budget. “We generally do not publish our long-range economic forecasts,” said Douglas Porter, BMO’s deputy chief economist, “and I would view these more as ‘assumptions’ than as ‘forecasts.’ ” Don Drummond, the chief economist at TD Bank Financial Group, is somewhat more pessimistic than the forecast average. Still, Drummond isn’t dismissive. “It is not as though they dreamed up a scenario biased to the optimistic,” he said. He views the budget assumptions as “credible,” although “the economy and revenues could certainly underperform.”

Yet Flaherty doesn’t build in any cushion against such potential disappointments. In his 2009 budget, he adjusted the private-sector forecast down just to be prudent—but not in 2010. Gone, too, is the old Liberal practice of setting aside contingency reserves. For Flaherty’s deficit-fighting plan to work, there can be no unpleasant surprises.


 

What if it doesn’t go as planned?

  1. Actually some assistant in Chick Strahl's office said 90%, and they averaged it with 14 others.

  2. If there were going to be any unpleasant surprises, they would have happened by now.

    • You know the gods don't ike to be mocked.

    • Indeed. God forbid we see another recession in the next five years.

    • Insert joke about the Conservatives getting elected here.

  3. this is an entirely reasonable strategy if you are not concerned with having to make tremendous changes to current spending levels.

  4. Doncha get sick and tired of "what if" journalism? Mr Geddes, stop it.

    • pls. i am glad that someone is paying attention to the "what ifs" before they become "too lates"

      • And it's fair game, given that a five year budget is based on a pile of 'what ifs'.

      • But Canada has a most responsible, sophisticated, far seeing, highly organised, and exquisitely fair minded official opposition, (meeting in fact in Montreal this weekend to ask themselves; what if we had a different leader?), whose job it is to ask, "what if" about any and all initiatives of the crude, unlettered, gratuitously malevolent, petty, and oh so insensitive current governing party. This is supposed to be how "what if" questions are raised in the blessed realm of which we speak.

        • it is everybody's – the opposition parties, the government party backbenchers, the media and most of all the electorate – job to question and ask "what ifs" of the government of the day ex cannuck. failure to do so is a failure to fulfill one's democratic responsibilities.

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