You have options, sirs -

You have options, sirs


Another of those pesky economists suggests the federal deficit will require some attention at some point. Luckily, Messrs Ignatieff and Harper have a choice of solutions. Unfortunately, “none of the above” is not an option.

Ottawa needs to acknowledge it can not return to surplus as early as it projected, and that tax hikes, even temporary ones, or deep spending cuts need to be incorporated to complete the task, said a report Friday from a leading fiscal forecaster…

Mr. Orr said there are two options available to return to surplus… In the first, Mr. Flaherty could wait for Canada to “grow out” of the deficit, which would not result in a balanced budget until the 2017-18 fiscal year. Mr. Orr cautioned that this option is based on the assumption that Ottawa caps program spending growth at 4%. Since the late 1990s, after the federal government successfully steered the country out of deficit, annual program spending has increased at a rate of between 6% and 8%…

The other option would be to introduce temporary tax increases, such as increasing the GST back to 7%. That would raise the money necessary to get the budget balance back into the black by the original timetable, 2013-14. Mr. Orr said a timetable could be produced under which the GST heads back down to 5%, but would be conditional on the government keeping the books balanced.