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Posts Tagged ‘Jim Flaherty’

I’ll have more to say on this later today, but it looks like  all of the tax cuts that Prime Minister Harper and Finance Minister Jim Flaherty have enacted during their tenure (4 years in February!) have come home to roost. What prize have our fine feathered friends brought us? Why it’s nothing less than a forecast return to structural budgetary deficits. A brief historical view of Canada’s budgetary balance and debt in visual form:

*Figures from The Department of Finances Fiscal Reference Tables

What you’ll notice is that for the first half or so of this graph outlays were consistently higher than revenues, ie. we consistently had yearly deficits, hence that ballooning green area, which is the Accumulated Deficit (Debt). For many years we had deficits, so that debt line just kept going up and up. But then things changed. You can see that around 1997 revenues started to exceed outlays. We went from consistently having a deficit (a ‘structural deficit’) to having a surplus. We even used some of that surplus to pay down the debt (the green line going down.) If you’ve actually looked at the above graphic, one of the most important pieces of information is what is not on it, and that is any data from 2009. That’s the time period where all economic graphs you look at have a daunting cliff dive.(Update: I have replaced the original graph in this post with a more accurate one that also includes projections through 2014.) Now look at the most recent points for 2008-9. Revenues have been significantly down in this period. During this same time the government has enacted a series of ‘stimulative’ measures, something I happen to agree with, that equals higher expenditures in 2009 than what has been the trend. That means we are back in a deficit situation. And the Parliamentary Budget Officer says that is going to continue for at least the next four years. That does not jive with Mr. Harper and Flaherty’s assessment of having a balanced budget by that point in time. More to come. I have read that Mr. Flaherty believes that we will be returning to balanced budgets shortly (trying to find a source of this still) and that “the government says it won’t increase taxes or cut provincial transfers to balance the budget.” Clearly when we are facing structural budgetary shortfalls we should decide ahead of time against using one of the two possible mechanisms for fixing this situation. And for some inane reason, ever time I hear this reported on the choices are phrased as either there can be tax increases or cuts in spending. I’ll have to teach those Conservatives a lesson their mothers and fathers should have already taken care of; using both strategies.

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