What, you don’t like holes?


On budget day in 2006, I was sitting on a stool waiting to do a TV pundit hit when Ian Brodie wandered through the Commons lobby and mentioned to me that this would be the first Conservative surplus budget since 1912, when Robert Borden was prime minister.

Fortunately progress toward fixing the problem Brodie identifed has been rapid.

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What, you don’t like holes?

  1. I was about to post this myself, but will instead lazily hijack your comment thread to ask my (non-rhetorical) question: When *was* the last time the government posted a deficit? The federal government, that is.

  2. Because Coyne seems to be on a blogging hiatus I’ll point out that the spending increase of $2.1 billion is more than the deficit of $517 million. If only Flaherty wasn’t the “Biggest Spending Finance Minister in History” we’d have a balanced budget for April and May. If he had simply held spending at 3% growth (instead of 7%), we would have had a surplus of roughly $500 million dollars. We then could have cut the corporate tax rate by another half a percentage point or used the money for highly productive income tax cuts.

  3. The $4.25 billion raised in the recently completed wireless spectrum auction will come in handy.

  4. Following in the footsteps of the Ontario Conservatives, I see. How are they doing these days?

  5. I guess this deficit is what PM Harper was musing about when he pledged to place limits on the federal spending power. Promise made, promise kept, I suppose.

  6. Is this all just perhaps that all politicians are genetically encoded such that their rhetoric can never match their actions? The Liberals talk all about spending and then keep it in check and produce surpluses, while the Tories talk all about cutting spending, and then spend like drunken sailors and run deficits.

    Either they’re both saying what they believe but are afraid to actually be seen to be governing that way, or they’re both disingenuous in their rhetoric, and governing according to how they really feel.

    Or, maybe it’s just opposite day (decade(s)) and no one bothered to tell us citizens.

  7. Kady According to Wiki, the budget was balanced in ’98, for the first time in 30 years. Mulroney regime balanced spending but was tipped into deficit due to interest payments on debt.

    As an aside, I would like to thank Chretien/Martin for turning many Canadians into conservatives, at least as far as the budget is concerned.

  8. JWL, does that include quarterly reports as well, though? I’m wondering if there were any other blips during the Chretien/Martin/Harper-up-til-now era — I don’t *remember* it happening, but perhaps it went un(or under)reported at the time because it always managed to turn into a surplus by the end of the fiscal year.

  9. I beleive there was a short one for a couple of weeks during October last year, but it was covered up by the sale of federal buildings giving the gov’t a good influx of cash and a long term rental contract that’ll end up costing more than they got.

    But that’s just prudent fiscal management, right?

  10. This is just great. Now we have a deficit. I have been expecting this to happen.

    With the tax burden on Canadians now making up the biggest spending item for households, and a morbidly bloated government apparatus in Ottawa, there was a major urgent need to cut taxes and spending substantially. Instead, Harper and his finance minister Flaherty made the conscious decision to outspend even previous Liberal governments. In fact, even an NDP government would have most likely been more restrained and reasonable (although I am not prepared to take any bets on that).

    On the fiscal front, the Harper government has failed Canadians, among the most heavily taxed in the world, miserably.

    What the Canadian economy and taxpayers need now are substantial cuts to personal and corporate income taxes so as to crank up the economy, and a lot less unnecessary spending. The federal government should only spend on infrastructure (transportation, roads, military) as well as health and education, with the provinces sharing equal responsibility for the latter two. Everything else should be shifted to provincial jurisdiction or provided through the private sector or in the form of P3 programs.

    This, and only this, would have been the sensible, reasonable and common-sensical thing to do.

  11. Don’t worry Wernel there is no deficit in point of fact we are 4 billion ahead it’s the way the media loves to post budgetary information yes we spent 500 million more than anticipated but this has alread been compensated by taking in 4.5 billion more than anticipate. Bean counters and jouranlists who love the word deficit – god save me from them!

  12. I will be bookmarking this post Wells. And pull it out in October win Flaherty annouces a surplus.

  13. At which point I will tell you, JK, that the federal government ran a $517 million deficit in April and May. But please feel free to pull out whatever makes you feel good in October.

  14. Wells says

    “At which point I will tell you, JK, that the federal government ran a $517 million deficit in April and May. But please feel free to pull out whatever makes you feel good in October.”

    OK, I guess I will not be pulling that out since you answered it already.

    But I believe the deficit came from April and the government posted a surplus for may, no?

  15. I think what this shows is that the margin of error or bad luck has shrunk very close to zero. There are ways to avoid a deficit for the year, but if the economy gets much worse or there are unexpected new charges, they may not work.

  16. Just for the record.

    I am a big Flaherty(and Baird fan) I remeber my high school history class going to queens park to watch QP. And I fell in love with politics and the PC party.

  17. Wells says

    ” think what this shows is that the margin of error or bad luck has shrunk very close to zero.”

    You are right on that. But if the CPC actualy hit the surplus they projected of 2 billion and I will not have to see the Harper clip from the debates where he says major surpluses over what you budget is bad managment, instead it will be the the CPC times are__________fill in the blank.

    Wells says

    “There are ways to avoid a deficit for the year, but if the economy gets much worse or there are unexpected new charges, they may not work.”

    Very true, interesting times to be fllowing Canadian politics.

  18. I just want to ask you wells since you spent so much time in France.

    What do you think are the chances of CPC getting a free trade agreement with the european union.

    I think Harper is letting Charest(aswome Premier of Quebec) take a lead in this. To give Quebec he voice they want. And Fortier as International trade minster makes me think that there is somthing in the works.

    Sarkozy has strong ties to certin people in Quebec. And after seeing fortier givin the international trade portfolio I have to think there is somthing going on.

  19. Please note that we can get a wee dumb about it’s-a-deficit-no-it-isn’t when we slice so thinly. Why, today I bought groceries and I ate out for lunch. And I did not get a paycheque today. Deficit notch on July 25! Just goes to show I can’t be trusted with my finances, I guess. No matter that the house and car are paid off, and I am living within means to squirrel away my overall surpluses into investments in order to be suitably punished for being an evil rich person in my senior years.

    IF a government can notch up surpluses in the SEVERAL BILLION$ year over year to whittle away at a thanks-Trudeau-for-nothin’ monumental federal debt, and
    IF tax cuts are instituted as the reward for the government getting spending into line, and whittling down that debt, and
    IF for one fiscal year there is a slight mismatch, with a deficit of a FEW M/BILLION$,
    THEN this Canadian is still very satisfied with the financial stewardship over the mandate.
    (Now, if only we could celebrate the “getting spending into line” bit…)

    To get all uppity over the balance sheet in a single month is not very flattering for anyone who claims to care about the management of government.

  20. I was going was going to throw a little jab at Trudeau as well… but you beat me to it.

  21. Mr Wells
    Mistake #1 Flaherty does not know anything about finances
    #2 Harper does not know anything about finances
    either although he is an “economist”
    #3 I remember the hitting the wall by the cons and
    the stupid clock ticking.
    #3 How did we get from huge surpluses to deficits
    the cons are famous for that so how can you honestly defend the undefencable?

  22. Carmen, insults like your #1 & #2 go nowhere helpful, and I do not remember whatever you do in #3-the-first.
    As for #3-the-second: if you do not know how one gets from surplus to deficit, then I fear you know less than the accused Flaherty & Harper.
    As for your charge that Mr. Wells is defending what cannot be defended, well, I am just stumped. What exactly do you see Mr. Wells defending? Rather I see him smugly pointing to a little red ink in a monthly cash flow statement.

  23. Speaking of conservatives budget history, has a conservative prime minister ever lowered the tax paid on the lowest income tax bracket? (Harper raised income tax, and I think Mulroney’s cuts didn’t match his earlier raises to the lowest bracket).

  24. Mike, I am not certain about the lowest income bracket, and I know this will not directly answer your question, but the GST cut from 7% to 6% to 5% certainly helped those in the lowest bracket, as well as those whose incomes are so low that they pay no income taxt to begin with.
    Perhaps a bit closer to your question: one problem that went uncorrected for many years during the Paul Martin era (as Finance Minister) was the “bracket creep” issue: lower-income Canadians found themselves bumping into higher brackets through simple inflation, because the boundaries of those brackets did not adjust. I believe Martin (or Goodale? or Flaherty?) finally sort-of fixed that by letting the bracket boundaries move with inflation again. But the bracket-creep was by no means fully reversed with that move.
    If I am not mistaken, at least one Flaherty budget moved up the income level at which you even start paying tax, so this is a gift to low-bracket income earners even if the rate of tax in that bracket did not change.
    All this is off the top of my head, and I happily submit to anyone with actual data to correct me.
    Final point, again subject to correction: Harper did NOT “raise income tax,” He just did not implement a Liberal proposal that never passed in the first place, because his electoral platform called for GST cuts and other measures (UCCB, transit pass deductions, sports-for-kids, etc.) instead. TOTAL income tax revenues are up, way up, because the employment situation has improved, but to my knowledge income tax rates did not go up.

  25. Heymadeyouloook, nice CON revisionism. Not implementing a tax cut that had been processed by a previous gov’t — every employer, including my own, who read the Goodale fall budget adjusted their rate accordingly, but maybe you’re employer is a revisionist CON too? — is in effect RAISING taxes.
    I’m sure you have no trust in the press, but as I culled from the Globe’s coverage of that 2006 budget:

    The rate on the lowest federal tax bracket, which stands at 15 per cent now, will rise to 15.5 per cent instead of 16 per cent on July 1 and will be locked in at that rate.


    Of course, I know what you CONs think about promises kept, promises made…

  26. Dan, Dude, cheer up! If you want to think of a cancelled decrease as an increase, well, throw that silly revisionism charge at a mirror, would ya?
    Your deduction-at-source off a paycheque may wobble, but surely you have participated in the great Canadian paper-push every spring, where all incomes, deductions and credits get sorted out for the previous calendar year, and any over-under gets taken care of by paying-on-filing or by a refund? Nothing changed, income tax did not go up, but GST went down, new credits and benefits showed up, etc… Grumpy, grumpy, grumpy.
    “Not implementing a tax cut that had been processed by a previous government…” Please see what I wrote: “it never passed in the first place.” And a major political party campaigned saying “we won’t cut there, we have better plans.” And that major political party got elected. If you’re PO’d because your paycheque bumped back down by five or ten or twenty bucks to WHERE IT WAS BEFORE the never-passed budget, might I humbly suggest a savings account? Living paycheque-to-paycheque is a silly way to live. Try working harder or longer, or try not to blow everything you earn on the cranky pills you swallowed a bit earlier. You’ll feel better that way.

  27. Instead of the back and forth, I think we should all recognize this for what it is.

    1) A dangerous trend that would be horrible if it continues, but almost meaningless if it does not.

    2) A potentially bad political story for the Conservatives that will disappear if they fix it before an election or be hidden come election time by using the wireless spectrum sale to hide any remaining deficit.

    Either way, I think it’s one of those things that gets Liberals legitimately, but uselessly upset and makes Conservatives worry, but hope for the best.

  28. Paul,

    Someone should probably have looked at the Fiscal Monitor over the last few years before buying into Liberal claims that this is somehow shocking. Its helpfully posted on the Finance Canada website and they actually highlight the surplus/deficit numbers in the FIRST line of the release, so it doesn’t even require much work:


    A quick look shows that Liberal Finance Ministers were running multi-billion dollar deficits in several months throughout 2003 to 2005 – including a $3.1 billion deficit in November 2005, a $9.5 billion deficit in March 2005, etc. I didn’t go back further, but I’m sure there were similar monthly deficits in 2002 and earlier

    So, unless certain people can now claim that Harper and Flaherty were secretly controlling Paul Martin or Ralph Goodale or John Manley, and the GST cut somehow travelled back in time to cause monthly deficits, it kinda seems like some people are trying to push a non-story here

  29. One of the reasons why Harper gave so many tax cuts is to get rid of the surplus. This is so liberals cant bring in any big spending national level social programs unless they raise taxes such as the Gst. This is why we are seeing the conservative attack ads that liberals will spend 60 billion and cause a deficit. The way things are going in parliment is not the way harper whould like but what can you do. Doing what you want dosnt mean much if you can’t stay in power, so compramises have to be made such as getting rid of the surplus.

  30. What good is an FTA with Europe, for example, if Canada as such continues to be non-competitive due to its excessive tax burden?

    When taxes make up the biggest spending item for households in Canada, and this is the case now, what we need is a drastic reduction in both taxes and spending.

    What we need is a lean and small government that learns to do more with less.

  31. What’s with all the unnecessary hyperventilating over this? This is a MONTHLY deficit, not a yearly deficit. According to that fiscal monitor site posted above (http://www.fin.gc.ca/purl/fiscmon-e.html), even Chretien/Martin ran a deficit in a few months in 2003 (October for example), and delivered a huge MONSTER surplus by year end.

    Monthly numbers go up, go down, based on wayyy to many variables to keep track of, so why bother? Stick with the year end number. If they end up running a yearly deficit, I’ll be at the front of the tarring and feathering line. I don’t see why anyone cares what the monthly position of the government is.

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