Wednesday, May 03, 2006

Possible Deficit?

If anyone thinks the Conservatives budget sacrifices fiscal responsibility for political gain, this article makes the point:
Big tax cuts and faint-hearted spending restraint forced the Conservatives yesterday to resort to the old budget tricks of skimping and fudging even on some high priorities...

That combination pushed the budget balance to the edge: a 1-per-cent rise in interest rates would push the federal government into a deficit this year, according to budget estimates.

While spreading money around, Mr. Flaherty was forced to cut corners.

To begin with, he gave slow starts to two items that figured high in Conservative rhetoric but did not explicitly make the list of five priorities: the military and the fiscal imbalance with the provinces.

David Dodge has already hinted that more interest rate hikes are on the way, which makes the Tories shell game even more dangerous. Practically, a very small deficit is not a massive concern, but the optics are bad for a country that has been a model for fiscal responsibility. The fact that Flaherty was forced to delay some spending measures that were promised should serve as a signal that this government is in risky terrority. Also alarming, that Flaherty axed the environment and aborginal spending to keep Canada in the black.

The good news for the opposition, the Harper government's "outreach" to voters makes the promise of fiscal balance a difficult proposition. Where will the government get the money to correct any imbalance? Surely, the government wouldn't risk a substantial deficit to appease. The Tories may have boxed themselves in for the future, if everything doesn't go exactly as planned.


Liz said...

I loathe the thought of a deficit..after all those years of trying to get rid of the last one, you would think they would have learned a lesson!!!!
It is going to cost a lot to appease the provinces right now and I think Harper has driven himself into a corner.

Steve V said...


"I think Harper has driven himself into a corner."

Harper has raised expectations so high he is bound to fall short.