How we got from there to here - Macleans.ca

How we got from there to here

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The Star sorts out how the federal books got the way they are.

Taking over the reins of government in early 2006, the Conservatives were bequeathed a $13.7 billion budget surplus by the Liberals. But by last January, the fiscal cupboard was nearly bare. Even before this year’s economic rescue package, Ottawa was poised to overspend its budget by $15.7 billion, according to Finance Canada documents …  This situation results from the Tories’ decisions to sharply reduce sales taxes and lower personal and corporate income taxes while simultaneously allowing a relentless upsurge in Ottawa’s spending. The Conservative budgets in 2006 and 2007 were notable for their largesse. The government committed to such large spending plans as $5.3 billion for defence, $39 billion for cash transfers to the provinces and $3.7 billion for a new baby bonus.

Beginning in 2006, the Conservatives cut the Goods and Services Tax, in two steps, to 5 per cent from 7 per cent, a move that now costs $11 billion annually in lost revenue … Besides lost GST revenue, the government as of this year is also foregoing $15.3 billion as a result of personal income tax cuts and $7.1 billion from corporate income tax reductions. In all, Conservative tax measures have trimmed Ottawa’s revenues this year by $33.9 billion…