‘Prudent planning’

Scott Clark and Peter DeVries find the Finance Minister’s budget update to be “lacking in transparency, accountability, and a realistic assessment of economic and fiscal prospects and risks.” And they suggest Mr. Flaherty start planning like Paul Martin did.

Mr. Martin’s lesson was simple. Once you have chosen the policy actions you believe are required, and given the economic assumptions, choose “risk adjustments” or “allowance for prudence” that will virtually guarantee you will not miss the target. Such a situation is “win-win” for the government. If the economy turns out better then you get credit. If the economy performs as bad as assumed you also get credit for your “prudent planning” …

Mr. Flaherty wants to now claim that he will eliminate the deficit in 2015-16. This is a mistake because the risks and evidence are stacked against this happening. It is virtually certain that he will have to revise his planning assumptions before or in the 2012 budget. It will be even more embarrassing if he has to revise it immediately after the budget.




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‘Prudent planning’

  1. I never understood the criticisms of Martin’s risk adjustments/allowances.  That’s pretty much how I’ve managed by personal finances.  As a result I managed to pay off a mortgage in 10 years. 

    • Yes, but did you buy a Lamborghini?  If you hadn’t put that money into a ‘yeah, but’ account, maybe it would have been possible to put a down payment on one.  You’d have lost your car and house later when you couldn’t pay the mortgage (as we’re seeing) but you’d have had a cool ride for a while!

  2. It only seems a win-win if you respect the public enough to believe that they’ll accept realistic assessments of the situation. If, on the other hand, you think the public consists of selfish idiots who only become vindictive against the bearer of bad news and so prefer fantasy to reality so long as it’s happy enough, this is a plan that will lose you the election.

    Given their actions in the last campaign, I think we know which way Harper et al lean.

    Sadly, given the results of the last campaign, I find myself wondering if they’re correct.

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