It’s structural

by Aaron Wherry

Stephen Gordon notes that the finance department considers the federal deficit to be structural.

Notwithstanding the Conservatives’ repeated rejections of the PBO claim, last year’s budget was an implicit admission that a significant portion of the federal government’s deficit was structural. If the Conservatives really believed that the deficit was purely cyclical, there would have been no need to adopt austerity measures in order to bring the budget back into balance.

The estimates released last Friday are a final confirmation of the problem.

This Sunday marks the fourth anniversary of Stephen Harper’s election promise that a Conservative government would “never go back into deficit.” The projected return to surplus has bounced around a bit since then. In April, Scott Clark and Peter DeVries doubted whether the latest target was achievable.




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It’s structural

  1. We will always have ‘structural’ deficits as long as we have pols who are unwilling to stand up to unions and their pay demands. Government continues to get more expensive even tho Cons are trimming people and departments – we pay more each year but receive fewer services.

    • You pay more for dumbass infrastructure allotments and services that make do nothing but make the sponsorship fiasco look like a great deal, and opening tax loopholes and credits that do not ensure long term growth and development.

      Running economies require more thought than encouraging people to dig shit out of the ground. People figured that out about 200 years ago but for the CPC it is apparently a revelation.

      • By definition, it’s only a revelation if it has been revealed to them. I think we’re still waiting for that epiphany.

    • Another right wing nostrum bereft of compelling evidence…as usual.

  2. And they know it and its why they cut the GST. They created a deficit so they would have the cover to pursue their dangerous economic ideology.

    It’s the same MO that is being used to get private prisons in Canada. It’s the same MO they are using to get rid of unions.

    So the question is, how can a kid like me understand this but it takes the MSM 6 years to finally catch on?

    What would our deficit and debt be if the GST was left at 7% and corporate tax rate left at around 20%? And no, a 2% cut to the GST a 5% cut to the corporate tax rate did nothing but put us 100 billion in the hole.

    • Because the media aren’t actually involved in politics….they do the surface stuff
      like the ‘horse race’ of polls, or Mulcair’s beard ….and if Trudeau is
      misquoting Goethe.

      Plus endless speculation, predictions, and seeing brilliance where none exists

      They are so keen to be ‘unbised and objective’ they don’t get involved in
      ‘details’ like philosophy, actions on the ground, real beliefs and so on in
      order to give a more in-depth accounting. They just do their column inches and
      hit deadlines.

      Jeffrey Simpson today….all these years later….finally realized the importance
      of religion in the Conservative party.

      As he says….
      ‘We in what is called the “mainstream” media tend to be secularists who either
      consider religion to be a private matter or have no religious faith at all. We
      tend therefore to minimize or miss the importance of religion in
      politics, especially Stephen Harper’s Conservative Party.’

      • How could he possibly know that … I mean with Marci
        MacDonald being among the disappeared and all ..

    • I think you missed the news earlier this week. Corporate tax rates are down. Federal corporate tax revenue is up. So your higher corporate tax rates are a revenue loser, not a revenue gainer. Your higher corporate tax rates are now ideological anti-evidenced based policy. And clearly, your mathematics education is clearly lacking in that you fail to realize that corporate tax revenue is not linearly correlated to corporate tax rates, and that there is clearly an optimum rate that generates the maximum revenue. Since revenue went up with lower rates, the optimum rate is argubably still lower, not higher.

      The critical priorities of most Canadians are health and education, which are primarily in provincial jurisdiction, so the federal government cutting the GST to create tax space for the provinces is a good thing. The feds tighten their belts so that the provinces have more flexibility to spend and tax for health care and education.

      • Berry-pomegranate what?

        So first you argue that there is a correlation between revenues and tax rate and then you inform me my math skills are lacking because there is no correlation between revenues and tax rates….I’m confused?

        And if your only objective is to create tax space, the GST is probably the last tax you should be cutting, unless of course it is your intention to create a structural deficit.

        • Corporate tax rates of gone down in the last year. Corporate tax revenues has gone up. Rates are NOT correlated to revenue. Basic mathematics suggests there is an optimum rate which garners the most revenue, and the actual facts, lower rates, higher revenue, suggest that the optimum rate is still lower to maximize corporate tax revenue.

          When it comes to taxes, suddenly progressives throw evidence based policy-making out the window.

          The federal government cutting the GST gives room for the provinces to raise their value added tax (or other taxes) to pay for health and education, which are the programs that are the highest in priority for the majority of Canadians.

          In order for the provinces to be able to spend more on health and education, the federal government must become structural smaller, because there is only one taxpayer.

          And as little corporate tax lesson demonstrates, and the misguided policies that Europe is pursuing now, higher tax rates are not likely to lead to more revenue, nor prosperity or jobs.

          • Dude you’re comparing to the revenues from last year. When compared to 2006, revenues this year are down. You don’t make policy decisions based on one year, that’s just crazy.

            You say “rates are not correlated to revenue” and then you go one to say lower rate equals higher revenues. Do you not see the contradiction in your own writing?

            Show me your evidence. Where is this magical mathematics you are talking about? What is the formula being used?

            And as i mentioned, if your going to create tax room, the GST is the last tax you should touch for that. Why did they not lower income tax?

          • You realize there was the Great Recession, the largest economic contraction since the Depression, between 2006 and 2012.

            So you want to compare revenues generated at the time of a massive worldwide US-credit induced financial bubble to revenues in the aftermath?

            Emergency monetary measures using non-standard monetary policy are still in place all over the world.

  3. No no MrG, the govt isn’t easily going to come around on this one; it’s their cover for pursuing a smaller govt is always better policy. ‘See! We’ve cut taxes and not touched a hair of our solemn commitment to Canadians via transfers to the provinces – upped them in fact; and yet we continue to be in deficit. Clearly something is structurally wrong ok, and it’s within the framework of an unsustainably large federal govt.’[ no need to point out the CPC had a hand[ cough] in growing that govt when it suited their purposes]
    If they are forced to concede that the deficit is in fact structural…well, that’s another matter altogether. That will shine a very bright light up someone’s political credibility orifice, one that will lead to some rather unfortunate questions to be asked; questions that the public might finally take an interest in? Why is there a structural deficit now, and who screwed up? since it wasn’t there when Martin left office? Even more sadly for the ever strategic PM, it”ll punch a nasty hole in his cover story; ‘that we tried our best, but sadly we can’t afford so much govt anymore’…that is, until SH finds he has a need for it again of course.

  4. Hasn’t this been a pattern for right-wing governments everywhere: spend like crazy to meet their own political and ideological objectives (typically in defence and law and order), cut taxes repeatedly to abet their business allies, run up the resulting structural deficit, bemoan the size of the “bloated” government, slash programs that facilitate income redistribution (“socialists” under every bed!!), and leave a fiscal mess to their successors.

    And then do it all over again a generation later when the electorate forgets.

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