Wednesday, January 21, 2009

Perfect Timing

Kevin Page is turning into a political nightmare for the Conservatives. The latest unbiased assessment comes at the worst possible time for the government, because it establishes a huge deficit, that can't be hidden within the buzzword of "stimulus". There is no doubt, the government was hoping to table a budget and frame any deficit as simply a result of proactive measures to help the economy. That Page comes out a few days before the budget release, and announces a massive deficit prior to any initiatives essentially means the opposition has powerful ammunition on the "wear it" front:
The pre-budget economic and fiscal briefing released by Mr. Page's office yesterday said Canada will run a budget deficit of $13-billion next fiscal year even before the Harper government spends a cent of stimulus money.

And, let's not forget that Kevin Page first warned of this shortfall on November 20th, just prior to Jim Flaherty laughably suggesting a slim surplus:
Parliament's budget watchdog warned yesterday Canada is at risk of recording deficits starting this fiscal year, and the annual shortfall could reach nearly $14-billion next year as it believes its worst-case scenario represents a "more likely" outcome.

The report takes some of the drama out of next week's fiscal update, which Finance Minister Jim Flaherty will deliver next Thursday in the House of Commons.

Page's latest report provides worse news looking forward, the prospect of all the progress, paying down the national debt, evaporating in a matter of years, is a sobering reality. Worse still, Page reaches this conclusion without factoring in any stimulus, again providing a powerful argument for Conservative responsibility.

The Conservatives are desperately trying to paint any deficit as simply a function of realities outside of our control, coupled with the need to intervene in the economy. Page reveals the disconnect between Flaherty's "rosy" projections and reality, which establishes one of two things, dishonesty or incompetence. When Flaherty rises, and he tries to wash his hands of the deficit, everyone will know the starting point. The Liberals have already pounced, and I suspect we will hear more references to Page's sombre analysis in the lead up to the budget. The timing is absolutely perfect, unless you're a Conservative of course. A fundamental OUCH, which confirms a negative legacy, that no amount of spin can overcome.

9 comments:

Anonymous said...

Kevin Page report today
says Canada has a structural SURPLUS of $6 B even after the 2% GST cut amounting to $15 B, catch is,
that is during normal economic times.

2009-10 year will have a deficit of $13 B ‘without’ a recovery package, due to loss of economic activity reduction,
not the governments tax reductions.

So Canada’s economy will eat up the $6B sturctural surplus with $19 B in revenue loss/increases social expense.

”…..As the caucus met, the Parliamentary Budget Office (PBO) released a briefing note that said Canada may have a structural surplus of about $6 billion, which means Flaherty could introduce some tax measures worth at least that much without harming the country’s long-term fiscal capacity….
The budget office’s conclusion that there is still a structural surplus, even after the Conservatives axed the GST by two per cent - worth about $15 billion a year to the government - may help quell Liberal objections to a tax cut. ..
The budget office also had some dismal projections for the state of the federal treasury, saying that, even before Flaherty spends a nickel next week, the deficit for 2009-2010 will be about $13 billion….”

Try reading the whole report before cherry picking and making stupid comments.

Steve V said...

Oh please silly Con. What Page is arguing, if the economy is operating in a normal growth period, it can withstand a 6 billion dollar drop in revenues, in this case tax cuts. Page is warning, that if the government makes permanent cuts that go further, no matter the circumstance we will run a deficit. That analysis says nothing about the fiscal mismanagement of the government, what you quoted. The 15 billion GST cut actually means, had they not squandered the fiscal room (the last cut, when the government said it knew a downturn was on the horizon, a fact which admits lower revenues), we would have a 2 billion surplus- that's what you've highlighted.

What you don't get, the Conservatives took us to the line, they didn't have the vision to understand the need for a buffer, heading into a rough patch. It is that lack of foresight that makes a deficit unavoidable, stimulus aside. You provided the numbers that make the point, Page isn't endorsing the record, in fact the opposite- if you don't CHERRY PICK.

Just one more point, Page doesn't do the equation, wherein the 100 billion dollar accumulated debt is factored in, as a drain on revenue, through interest payments. Based on what Flaherty has argued, when paying down debt to date, the new amount of fiscal room, there goes your 6 billion right there, and then some.

Steve V said...

Oh, and put this in your pipe and smoke it:

"The weak fiscal performance to date is largely attributable to previous policy decisions as opposed to weakened economic conditions," Kevin Page

Steve V said...

Page predicts GDP growth of 3.8% in 2011 and 3.5% in 2012, which represents solid expansion. Page predicts a deficit of 8.6 billion and 7.4 billion in those years. That means, that despite very sound growth, by any measure, we will still be in a deficit position. Those facts demonstrate clearly that the Conservatives have put us in a position, wherein the deficit balloons further, even when the economy expands, we now require exceptional growth just to balance the books. Compare that, with the GDP growth in past years, and you see mismanagement.


Here's the whole report. It's a great read, unless of course your a Conservative partisan, then it looks like an obituary.

Antonio said...

I dont see how the Libs support anything deficit Jim can put forward...

shadow budget steve,,,watch

Scotian said...

"Page reveals the disconnect between Flaherty's "rosy" projections and reality, which establishes one of two things, dishonesty or incompetence." Steve V main post

Or two quote Grandpa Simpson, "A little from column A and a little from Column B” With this government there is a good argument for both dishonesty AND incompetence being involved if/when Flaherty makes the argument abut how the deficit came to be.

It has been obvious to me for some time now (as in a year or more) that the CPC government was spending far more than it was taking in (especially after the useless to all but the very well off GST cuts which did nothing for those of us at the bottom end of the economic spectrum despite the idiotic CPC spin to the contrary) and that we were almost certainly in deficit and being covered up.

By late last year it was obvious from the drunken spending sprees Harper went on in 2008 that not only were we going into deficit but by no small amount either. Consider page's numbers as being accurate, that means the CPC went from a 13 billion dollar surplus three years ago to a 13-14 billion dollar deficit BEFORE the international economic meltdown really had any impact on government spending and revenue numbers, a 26-27 billion dollar swing with little to actually show for it, especially in terms of sound long term value.

I am pleased to see Page still trying to do his job despite the fact he has been pressured to not differ with the government by the Parliamentary Librarian, a position btw I find baffling by that office since the PL is responsible for producing non-partisan information whether it conflicts with what a government is saying or not. So why does it matter in Page's case so much and not in the other areas under the PL's jurisdiction under this government and is there pressure being brought down on the PL by the political side of the government, in particular the PM's office? It does have a bad smell to it for political interference of some sort.

burlivespipe said...

Spending the cupboard bare so that future governments couldn't create or respond to big-ticket needs of Canadians, that's Harper in a nutshell. He got his economics degree out of a cereal box, his speeches off a Crocodile Dundee movie, and his anger from too many junior high wedgies.
So tax cuts for the middle (and upper-middle) class sounds like more Bushian folly during a time of recession. Kind of makes me think kindly of Mulroney...

RuralSandi said...

Bush and Harper - like 2 kids that got hold of daddy's credit card and went wild with spending.

Hmmm.....they both have the same economic degree.

Steve V said...

Scotian

Just as a continuation of what you've mentioned, the spending "like drunken soldiers" continued on, despite this supposed knowledge of a coming downturn. The Conservative position is so non-sensical, they continually point to the measures they took in the fall of 2007, as an example of future planning, for storms clouds they saw on the horizon. If that is a fact, which it isn't, but allow them their talking point, how in the hell do you defend the level of government spending after this point? Spending three times the rate of inflation at the time, completely abandoning any sense of fiscal disipline, and yet we are too believe you were preparing the landscape ahead to deal with the challenges. The contradictions are simply amazing, they're just making it up as they go.