2013? 2015? Ever? - Macleans.ca
 

2013? 2015? Ever?

The early word on Jim Flaherty’s latest fiscal forecast


 

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The GlobeFinance Minister Jim Flaherty says Canada’s economic recovery will bring Ottawa very close to balanced budgets in five years but is refusing to promise exactly when the Tories will eliminate the federal deficit.

The Star. The Conservatives admitted today that the federal government deficit would be worse — $101 billion this year and next — than expected and that the government cannot say when it will balance the books again.

Canwest. The federal Conservative government said Thursday it won’t be able to balance its books for at least another five years and can’t pinpoint a year as to when a surplus would emerge. Furthermore, deficits for this fiscal year and next will collectively top $100-billion — or a third more than the original budget expectations.

Roll tape…

Feb. 5, 2008“The way to manage this economy through difficult global times is not—as the Liberal Party would do—to drive us into deficit.”

Oct. 7, 2008“I know economists will say that we can run a small deficit, but the problem is once you cross that line, as we see in the United States, nothing stops deficits from getting larger and larger and spiralling out of control, and we want to avoid the kind of government, household and trade deficits we see in the United States.”

Oct. 14, 2008“We’ll never go back into deficit.”

Oct. 17, 2008“I believe, based on everything I’ve seen so far, that there’s no reason why the government of Canada won’t stay in balance, why we can’t maintain a balanced budget this year,” Harper said, speaking after a meeting in Quebec City with French President Nicolas Sarkozy. But for future years, he said it would be premature to say if his government will be able to maintain a surplus. “Others are speculating about future years. I don’t think we’re yet in position to know all the information in that regard and I think it would be premature to speculate on that.”

Nov. 6, 2008“One message was very clear. Don’t be afraid to run a deficit if the deficit is in the best interests of the economy.”

Nov. 24, 2008“The government of Canada today is in surplus,” he said Sunday at the conclusion of the summit. “The government of Canada today is not planning a deficit. But if the government of Canada decides … that we do have to engage in fiscal stimulus, that government spending is essential not just to shore up economic activity but investment markets, that would be the occasion we would go into what would be called a cyclic or a short-term deficit. But we would only do that if we can assure ourselves that we can do that while preserving a structural surplus, that any return to a normal level of economic growth will immediately take us out of deficit. And that’s the only condition under which we would consider that set of actions.”

Nov. 27, 2008“Mr. Speaker, as I have said many times, Canada is not currently running a deficit and this is thanks to the good management of the Minister of Finance, who will present his economic and fiscal update later today.”

Dec. 1, 2008“If we run a deficit of $30 billion in this country, we are running a structural deficit. It took a long time to get out of that problem. We have taken the long-term view, the view that says we have to help Canadian business with the Bank of Canada, with Bill C-50, with ensuring adequate credit in this country. There are more provisions in that regard in the fall economic statement, all good for the country, not running big deficits.”

Dec. 16, 2008“We’re going to have to run a deficit, do some spending measures we hadn’t planned on doing, but I think, if we do those things, we should be able to come out of this (economic downturn) pretty strong in due course.”

Jan. 23, 2009“I think we’re in a rare time where you need a deficit.”

Jan. 27, 2009. “There will be no long-running or permanent deficit … As the economy recovers, we fully expect to emerge from deficit and return to surplus within five years.”

May 14, 2009. “Our deficits will be large, but they will be temporary,” Harper told Quebec municipal leaders gathered for an annual convention. “In fact, in the short term, they will be as large as they have to be to help us weather this recession. As a country, we can afford it. But only if these deficits are temporary and our stimulus spending ends when the recession ends.”

May 26, 2009“We will run a substantial short-term deficit this year which I would estimate at more than $50 billion.”

June 11, 2009“Our deficit will be significant but is affordable.”

June 13, 2009“He’s wrong,” Flaherty told journalists in a conference call from a G8 finance ministers’ meeting in Lecce, Italy. “Because he says growth rates likely will be slower than I had predicted. Now, if you make an assumption with respect to lower growth rates, then you get the results that he postulates. But anybody can do that.”

June 25, 2009“If you take out the one-time spending, we have a deficit of only about 1.5% of GDP and we should easily recover from that in the two years following the recession.”

July 10, 2009“We will allow the deficit to persist if necessary. We will not, in order to meet some timetable, start raising taxes and cutting programs. That’s a very dumb policy … If the recession turns out to be longer than that, for example, or the recovery turns out to be shallower, then that will change the pattern of the recovery from the current deficit.”

(Note: Most are the comments of the Prime Minister, but a few are excerpted from remarks of Finance Minister Jim Flaherty.)


 

2013? 2015? Ever?

  1. I feel like we've been watching a pregnancy grow from conception to a very painful labour.

    Surplus.
    No Deficit.
    Small deficit.
    12 billion deficit.
    30 something billion deficit.
    50 billion deficit.
    100 billion deficit.

    All in nine short months!

    • And by conception, we could of course mean CONception or simply deception. We all know they were lying about the hidden structural deficit from the start.

      As for labour, we all know that Canadians will have to do the heavy lifting…probably under a responsible Liberal government.

    • The $100 billion figure is cumulative for two years. The Star should have worded that more clearly in their article.

      • Regardless, it has grown out of control and well beyond the wildest reckonings of our "Finance Minister".

        • Deficits, loathsome as they are, are not like cancer. They don't grow indefinitely. There are many positive indicators for the Canadian economy right now, and if the recovery is faster than expected, we might actually see those projected deficit numbers decrease six months from now! (fingers crossed)

          • Fingers crossed, yes. But it's a big "if" and while there are some positive indicators, there are some negative ones too.

            Here's the $64,000 question: What did we get for this debt?
            The $128,000 question: What didn't we get that we ought to have gotten?
            Bonus round: What did Tory ridings get that non-Tory ridings didn't?

          • Not by looking at the number they're throwing out to support their deficit projections. After this year, it looks like they assume about at 4.5% growth in GDP each year and 7% increased revenue – those are reasonable, but rose numbers. Unless of course inflation shoots up, which would wreck the other assumption they've made, that spending will only increase by about 4% a year.

            Yes, the economy could recover stronger and faster than most of us are expecting, but it looks like the Conservatives are already banking on that.

    • The 100 billion figure is cumulative for two years. The Star should have worded that more clearly in their article.

    • The $100 billion figure is cumulative for two years. The Star was sloppy in their wording the first time round – they have since revised that sentence to read: "a total of $100 billion this year and next".

    • 1. It is very easy to make that list extra long if you mix up two-year projections and one-year projections.
      2. Could subsequent posters explain how Michael Ignatieff would have avoided a deficit assuming he took power last December (no re-takes!).

      • Could subsequent posters explain how Michael Ignatieff would have avoided a deficit assuming he took power last December (no re-takes!).

        Should read: "assuming he took power last January". Good point, though. There is no conceivable way that Ignatieff could have avoided a large deficit. I suppose one could argue that Ignatieff's stimulus would somehow have been more efficient than Harper's stimulus, so the Ignatieff deficit would have been slightly less than the Harper deficit, but that strikes me as unlikely.

      • 1. Has it grown or not? Were the projections on or off? And what did we get for all this?

        Flap all you want, it doesn't change the point. Flaherty was wrong. Flaherty is incompetent. Flaherty didn't see this coming, and refused to listen to anyone who did.

        2. It's not incumbent upon Michael Ignatieff or anyone else to say what they would have done; only what they are going to do if or when given the chance. If they provide a explanation of what they would have done, that's gratis. But it's not the expectation. As for what he would do, I heard something in the news the other day about a platform being prepared. I imagine we'll soon learn the answer to that question.

      • So Harper gets to pass the buck and duck responsibility because you don't know what Ignatieff would have done??

        Does any Conservative think Harper is responsible for anything? Ever?

  2. Yeah, but Iggy is just visiting, so it's his fault. Win-win.

  3. … is still trying to wrap his head around the fact that the Globe is reporting about the CPC more favourably than the Star and Canwest.

    • yeah wtf is that headline? on a day that the Finance Minister just said that 1) the deficit is bigger (again) than suggested; 2) that no firm timeline for eliminating it is in place; and, 3) that they will put off the hard choices of how to kill this deficit until down the road, that is how the Globe sums up the day?????

      no wonder Canadians don't know what is going on.

      • In fairness, the Globe headline is: "Flaherty unveils murky blueprint for balanced budget". They included the word "murky" for a reason.

        • Ah, thanks. All is once again right with the world, the snail is on the thorn, the Globe is mixing opinion with hard news, etc. Phew.

        • murky? CR, he plainly stated they are not going to make the decisions that end this for years. it is not murky, the blueprint is incomplete. If you paid an architect for house plans and she said 'we'll decide how to support the second story later', would you accept that as just 'murky'?

  4. Somehow I think that the more we see of Jim Flaherty, the happier the Liberals will be.

  5. So no chess then? Damn. Chess is fun.

    • This is no time for jokes, man. Explain to me the hidden genius of today's ploy. It evades me, and I'm rarely comfortable with thinking for myself about these things, as you know.

    • do you think it is easy playing chess?

      • Maybe we should just let the Wookie win.

  6. Blind Man's bluff is the new chess.

  7. Blind Man's Bluff is the new chess.

  8. Sure bluffed me.

  9. I'll never believe one of CTV's unnamed sources again, I'll tell you that much.

  10. "We will not……..start raising taxes and cutting programs."

    Yeah these guys are going to magically make a $50 billion deficit go away without any pain. Harper and Co. need to be honest about this (good one, I know I know) and admit either tax increases or spending cuts are needed to kill the deficit.
    Otherwise, I expect to see Harper and Flaherty on the breakfast circuit this fall, making omelettes for everyone wiothout cracking one egg.

  11. Deficits are actually a lot like cancer and unless stopped do grow forever. Deficits are an annual increase in the net debt, and there is a cost to maintaining that debt that must be paid annually. Fortunately, at this point interest rates are low so the cost of servicing that debt is less than it has been in the past. So to go back to the cancer analogy introduced by Crit. low interest rates mean a slow growing cancer.

    Of course if GDP is growing faster than your total debt then the situation is stable. We are hardly in that position today, with optimists talking about the GDP going up fractions of a percent.

    Also if the total size of the deficit can be argued to be insignificant relative to the total GDP then although the trend is wrong there is no reason to panic. That also is not the case

    http://blogs.usask.ca/the_bolt/archive/2008/01/ca

    This data shows that the $100 billion scale is very significant and returns us to the economics of Trudeau and Mulroney. I am not aware of any economist forecast predicting a significant increase in interest rates… so maybe we should expect an increase in interest rates.

    This election should really be a pissing contest between the Liberals and Conservatives about who would be tough enough to deal with this issue and get Canada back to a dominant economic position. Unfortunately with Ignatieff's retreat from talking about at least the possibility of a tax increase, the economic part of the debate is about who can bury there head deeper in the sand.

    • Interest rates are low, so even if the governing party did nothing to stop the deficits (which is clearly not the case here) there is a good chance that once government spending returned to normal pre-stimulus levels, the increase in government revenues would exceed the additional interest payments, balancing the budget over five years or so.

      A $100 billion increase in net debt is certainly significant, but our debt-to-GDP ratio is nowhere near what it was during the bad old days of Trudeau/Mulroney.

      • Actually our debt to GDP is exactly what is was when Trudeau was PM.
        (That is a cheat because he raised its value so much, it is much lower than when he left office)
        However, the principle failing in Trudeau's economics was an inherent optimism that next year will be much better than the last, which has been Flaherty's failure at both the provincial and federal levels as well.

        I guess I am surprised that so call "conservatives" accept this pollyanna stuff in forecasting the economy… whatever happened to plan for the worst hope for the best.

        • I guess I am surprised that so call "conservatives" accept this pollyanna stuff in forecasting the economy… whatever happened to plan for the worst hope for the best.

          For some reason, pessimistic forecasts don't seem to fly when elections are imminent. This applies to both the Conservatives and the Liberals. I can't wait to see Ignatieff's polyanna-esque plan to balance the budget while not raising taxes, not cutting programs, and funding big-dream megaprojects (high speed rail, anyone?)

          • I wonder how different it could be from Harper/Flaherty's run of incompetence and long-term without a real plan military spending?

      • What consideration would you give to interest rates rising very soon and very fast in order to avoid bubblemania and the far-reaching effects of issuing bonds en masse?

  12. I watched Deficit Jim's fawning softball question interview on global last night. In it Jim expounded the virtues of Canada's great tax system and "Tim Horton's is moving it's head office back to Canada" so I guess the tax system must be good. Jim did not mention the loss of Nortel, it's high tech jobs and patents that are leaving Canada for foreign shores nor did he mention Canada's failure to protect it's isotope business. Both these stories developed on the Conservatives watch.

    But Tim's is moving back so all is well in Simple Jim's eyes.