Public deficit: between shining federal figures and bitumen bubbles

Isn't it time to start counting all of our public debt?

As of November 2012, almost three-quarters of the way into fiscal 2013 (April 1, 2012 to March 31, 2013), the federal deficit stands at $12.4 billion, Finance Department said today. That’s quite a bit below the $15.5 billion shortfall recorded over the same period last year.

Given these year-to-date figures, it’s reasonable to expect that federal deficit for the year as a whole will come in under the $26 billion the Harper government predicted back in its November fiscal update. Sonya Gulati, at TD Economics, for one, expects a $22 billion deficit. In a note to clients this morning she even predicted that “the government’s 2016-2017 deficit reduction timetable could be reasonably be brought forward by one year.”

That’s still not enough to balance the budget by the next election, which will probably happen in late 2015, as the prime minister would like, but it’s far better than what most provincial premiers can say.

It certainly stands in stark contrast with Alison Redford’s “bitumen bubble” speech yesterday.

Lower than expected prices for Alberta’s oil are leaving it with not enough cash and too much of the icky black stuff.

“This bitumen bubble,” she told Albertans in a taped video clip last night, “means the Alberta government will collect about $6 billion less in revenue this year alone.” That’s how much the province spends on education every year, she added.

That will likely be the $3 billion deficit Redford already expects for fiscal 2013, a shortfall that was originally estimated at only $800 million.

The trouble, as you probably know (if you don’t read more here), is that without a convenient and fast way to deliver Alberta’s oil to where it’s needed, the price of Canadian heavy crude is dropping and the spread between it and world prices widening to record levels. As the Bank of Canada noted this week, lower resource royalties will leave provincial governments cash-strapped—and not just in Alberta.

But energy market woes are only part of the problem when it comes to Canada’s provincial coffers: it is Ontario’s credit rating, after all, that’s on the line, not Alberta’s (at least for now). But the more serious, long-term problem for resource-rish and resource-poor provinces alike comes from swelling ranks of seniors and low replacement rates.

Just a few days ago Kevin Page, Canada’s top budget watchdog, reiterated that Ottawa had better start producing periodic analyses of long-term deficit and debts of all layers of government, something the auditor general also recommended.

That seems like a mighty good idea.