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Rosy Scenario, please call your office


 

What a surprise…

Canada’s deficit to balloon by $18-billion, economists say

The worsening recession will drive Ottawa $18-billion deeper into deficit over the next two years, a leading economist is predicting…

Toronto-Dominion Bank says Ottawa’s budget shortfall will be $5.5-billion deeper in the 2009-10 fiscal year starting April 1 because the slowing economy will cut tax revenue even more than expected and rising joblessness will require $1-billion in extra employment insurance payments from federal coffers.

This would drive the deficit to $39.2-billion in 2009-10 instead of $33.7-billion as the Harper government predicted in January…

The fiscal year hasn’t even begun, and they’re already off their deficit forecast by about 15%. And next year? Try 40%:

But the gap widens even more in 2010-11… They’re forecasting that Ottawa will be $12.5-billion poorer than expected in that fiscal year due to lower than anticipated tax revenue as well as $2-billion in extra EI payments. This would push the 2010-11 deficit to $42.3-billion instead of the $29.8-billion projected.

The Globe tries to amp up an already shocking story by claiming these are the largest budget deficits on record, but of course that’s only in nominal (dollar) terms. As a share of the economy — which is the only meaningful way to measure the burden — they’re nowhere near where they were in the mid 1980s: roughly 2.5% of GDP, versus 8%.

But jeepers. The trend line sure isn’t good. There will be no “quick return to surplus” such as the Tories promised. To save their government, they have blown a hole in the budget that will take years and years to repair.


 
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Rosy Scenario, please call your office

  1. If only some previous government, sometime in our past, had had the foresight to build up some sort of surplus to help us somewhat mitigate tough times like we’re experiencing now! That would have been brilliant.

    • I assume you’re being sarcastic about the window dressing that was marketed by Paul Martin as some sort of cushion.

      • No, I wasn’t being sarcastic in that sense, though I take you point.

        I’m not saying the surplus would have saved us. Hardly. Still, it would’ve been nice if that $12 billion surplus the Liberals left behind hadn’t all disappeared immediately before the biggest economic crisis of a generation. Maybe if they’d kept the surplus the Tories would just be looking at very large nominal deficits, not unprecedented nominal deficits.

        It just seems to me that Liberals talk about spending and programs, and then tend to manage the budget prudently, while Tories talk about cuts and deficit/debt slashing, and then spend like drunken sailors.

        It’s not a coincidence that the “record” for deficits (such as it is) that the Tories look ready to break is a Tory record.

  2. In fairness though, I’m willing to cut the Tories a little bit of slack that the forecast they made about 7 weeks ago is now deemed overly rosy, what with the Governor of the Bank of Canada recently announcing that the forecasts HE made about seven weeks ago now turn out to be overly rosy. A little slack.

    Surely a “conservative” government would take a B of C outlook for the future and then base their assumptions on a more, what’s the word, CONSERVATIVE estimate of where we’re headed, in order to be prudent. You know, add in a little prudent cushion in case it turns out that Mark Carney isn’t God.

    As it turns out, Mark Carney isn’t God (shocker!). Sadly, the one thing the Conservatives have no apparent familiarity with whatsoever is “being conservative”.

    • I have started to think of them as thre Conselfservative Party.

    • Carney was carrying the Harper government’s water for them and got called out by the International Monetary Fund. No need to cut them slack on this. Carney was singing from their hymn book.

      • i wish someone reprezenting would “stand on guard for [me/us]”

  3. I am still stupefied by Harper’s belief that after 15 years of infighting between cons after Mulroney era, the best way to govern is to be a lot like Mulroney. The 3 F’s Harper gave himself and his government the other day are looking even more appropriate.

  4. “To save their government, they have blown a hole in the budget that will take years and years to repair”

    But AC think of the wonderful election add this will make. ” Look frankly, if the liberals had been in power the hole would have been this much [ name yr figure] bigger. Canada’s newer, nearly new, Harper govt. Only making non-liberal sized holes in yr budget”! .

  5. One other point I’d make is that while it’s entirely valid to point out that calling this projected deficit the “largest in Canadian history” isn’t perfectly fair given that that’s in nominal unadjusted dollars, I still think it’s worth pointing out the relative size of the projected deficit, given the context.

    This is a PM and a government that said ON ELECTION DAY that we’d never go into deficit again. It was a pretty definitive statement. So, I think, if only for comparison to the Tories’ rhetoric, it’s worth pointing out that “no deficit ever again” has turned into “largest deficit (in unadjusted dollars) in Canadian history” in just about 5 months.

    • Yes, the Tories were wrong in October, just as the governments of all other G20 nations were wrong about their own forecasts back then. For shame! Good thing the opposition parties were able to call Harper on it back during the election campaign… oh, wait… their economic forecasts were even rosier.

      • And yet, even with (supposedly) rosier forecasts, I don’t recall any of the opposition leaders pledging that we’d never go back into deficit again. As for their forecasts being rosier, I seem to recall the Tories talking on and on about how the Liberals and NDP were trying to talk down the economy. Are you saying they were “talking down the economy” by presenting forecasts that were rosier than those of the Tories? ‘Cause that’s not how I remember it.

        On the broader point, it’s true that no one really accurately predicted in October how bad things would get. However, to my memory, only the Tories seemed to be saying that everything was pretty much fine, and I’m quite certain that the Prime Minister was the only leader to pledge that we’d never go back into deficit again!

      • Yes but those november surpluses would have come in handy about now – must’ve meant 2010!

        • And yet, even with (supposedly) rosier forecasts, I don’t recall any of the opposition leaders pledging that we’d never go back into deficit again. As for their forecasts being rosier, I seem to recall the Tories talking on and on about how the Liberals and NDP were trying to talk down the economy and were being overly pessimistic. Are you saying they were “talking down the economy” by presenting forecasts that were rosier than those of the Tories? ‘Cause that’s not how I remember it.

          On the broader point, it’s true that no one really accurately predicted in October how bad things would get. However, to my memory, only the Tories seemed to be saying that everything was pretty much fine (“if we were going to have a recession we’d have had it by now”), and I’m quite certain that the Prime Minister was the only leader to pledge that we’d never go back into deficit again!

      • I’m not sure the opposition’s economic forecasts were “even rosier” (which, if true, would kinda put the lie to the Tory talking point during the election that the opposition was being overly pessimistic, and even attempting to “talk down” the economy) but no matter what their forecasts were, I’m absolutely certain that the PM was the only leader pledging to never go back into deficit again. Some might even say that Dion’s refusal to make such a (preposterous and ill-advised) pledge was one of the (many, many) reasons the Liberals lost.

        I’m not at all suggesting that Harper et. al were the only one’s to underestimate the nature of the economic crisis back in October. I do, however, think it could be argued that the Tories were the only one’s to act as though there was no economic crisis whatsoever (“we’re never going back into deficit”, “if we were going to have a recession we’d have had it by now”…). There’s no evidence that the Tories were the only one’s who were wrong, however I’d say there’s considerable evidence that the Tories were on the leading edge of being wrong. Everyone was wrong to some degree, the Tories were just much more wrong than most.

      • Anyone else having a lot of trouble posting comments lately?

        • Yeah, I think they’ve got some sort of new automagic censoring software in place, and it’s a little quick to judge.

        • Yup. But then if this one doesn’t make it through either, you won’t know whether we’re ignoring you or lost in the wilderness…

          • LOL Got that!

            Whatever the new system is, it’s WAY to quick to judge, imho. I generally don’t post crazy or inflammatory comments (right?) but I’ve had comment after comment after comment fail to get through these last few days. Comments I wouldn’t even know how to BEGIN to edit to take out something that would potentially offend. I understand the need for moderation, but I think something’s gone wrong, or the new system is WAY too sensitive.

            Of course, part of it is my OWN frustration, as I’ll often write a novel of a comment, and then just walk away, ’cause I’m not writing all of THAT over again (and probably, people are pleased at that!!!).

          • Comment.

            ‘Cause apparently, one more word than that is just too sensitive to get through.

            VERY FRUSTRATING MACLEANS!!!

          • LKO says: I generally don’t post crazy or inflammatory comments (right?)

            Cool with the “generally” qualifier, LKO, and I suppose I should Google it to be sure, but I do have you down as going to vote in the last federal election with the $1.95/yr assignment your primary motivator. Which earns you “occasional crazy.” Or am I misremembering?

  6. “To save their government, they have blown a hole in the budget that will take years and years to repair”
    Wonderful add there. ” Harper buget holes smaler than liberal holes – vote conservative!

  7. Guys, guys, you’re all missing the point. You’re talking as if deficits are a bad thing, a sign of a government that can’t or won’t manage spending carefully. But that’s oldthink. Nowadays, deficits are “essential.” They’re stimulus!

    • Also, deficits are so fashionable these days. Can you imagine all the snickers at the G20 conference if Canada showed up without one? How gauche!

      • LOL

      • chuckle. cuz duplicate lol isn’t allowed

      • What kind of a neocon rethuglican goon would show up to a G20 meeting without a deficit? Flaherty may as well show up wearing a silk sweat suit.

        I read on Relentlessly Progressive Economics about a month ago, that Canada needs not only a larger stimulus budget, but also a “Buy Canadian” policy. Why? To prevent other nations from mooching off our stimulus. Cuz otherwise some people might spend their stimulus dollars on imports, thereby stimulating foreign economies instead of our own.

        Now, you see how potent this stimulus stuff is? If you’re not careful, you’ll end up stimulating everyone’s economy!

  8. Hey KC its your government too.If you don,t like it do something about it.OH YOU CANT EH!..Is it because all you have is a big mouth.

    • projection much?

  9. so, more “disaster capitalist” political opportunities then?

  10. I know you’re disappointed Andrew, but surpluses are no good whatsoever to any politician. If they eliminated or drastically reduced govt debt then … their friends the bankers could no longer make free money by selling the debt for them … they would have to lower taxes and cut bureaucracy, welfare programs, pork, bailouts and stimulus … which would anger the dependent class of people whose votes drive the political system … and it would only benefit the country’s most diligent workers and savers who are generally apolitical if not entirely contemptuous of politicians.

    See “Hamilton’s Curse” by Thomas DiLorenzo:

    He established the imperial presidency. He devised a national banking system that imposes boom-and-bust cycles on the American economy. He saddled Americans with a massive national debt and oppressive taxation. He pushed economic policies that lined the pockets of the wealthy and created a government system built on graft, spoils, and patronage. He transformed state governments from Jeffersonian bulwarks of liberty to beggars for federal crumbs.

    Sound familiar?

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