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Toronto Centre Federal By-election (cancelled)

I'm wondering if the still little-know federal deficit for the month of October 2007 will pop up in the by-election chatter. Then again, I wonder if that trend will have continued to November.
 
It's amazing how ignored that is. A decade of Liberal management, and not a single deficit even through recession. The Tories get in and barely a year later they're already running a deficit in the middle of a boom.
 
This is a monthly deficit as far as I understand -- and yes there were months under the Liberal government that individually were deficits. It is the annual deficit that we have to worry about.
 
It'll be interesting to see if this trend continues in November.
 
You mean it would be interesting if this becomes a trend. One month does not make a trend, and the "adjustments" are for changes that affected the accounts since the beginning of the year -- but now have to be adjusted. Come the financial year end there will again be a minor "storm" about the government collecting way more than it spends again. Even with the adjustment, the year is still in a significant surplus position.
 
Well, every trend starts with one data point. It'll be interesting to see what happens this year and next, given that growth will be below Ministry forecasts.
 
The difference is that almost any budget deficit during the Liberal tenure was as a result of one-time social spending, while this Tory deficit is coming from poorly-structured but permanent tax cuts. They may be commencing starve the beast operations already. Look how long it too George Bush to turn Clinton's immense budget surplus into an equally bulging deficit.
 
Hard to see Red Tory types in Rosedale going for a Pentecostal minister...I think the Conservatives might actually fall below deposit level.
 
I was listening to CBC this morning and they said on the news that we have a very very small margin between surplus and deficit for the annual budget this year thanks to Flaherty's October budget... with the huge threat of slowdown in the economy now... I think it'll probably happen.... Something tells me that $6-billion in lost revenues would probably come in handy this year.
 
Here's that story..

Federal tax cuts could push Ottawa back into deficit, says think tank

21 hours ago

OTTAWA - The federal government's recent tax cuts are taking up so much fiscal room that even a mild economic downturn could result in the first budget deficit in over a decade, says a new report to be released Monday.

The paper by the left-leaning Canadian Centre for Policy Alternatives finds that last October's budget cuts, along with previous reductions announced by the Stephen Harper government, will cost the treasury $40.2 billion annually at the end of the five-year cycle.

"The fiscal update came at a time when they thought the worst of the financial crisis and U.S. slowdown was over," said economist Marc Lee, who wrote the study for the think tank, a persistent critic of the Conservatives' tax and spending policies.

"So now, it would not take much of a drop in economic growth before the budget returned to deficit. It's possible they miscalculated, or they might argue that tax cuts are just what the economy needs heading into a recession".

The paper slated for release Monday uses government estimates contained in last October's fall update, but substitutes four different growth scenarios for gross domestic product (GDP) - each gloomier than the previous one - in place of the government's now rosy-looking forecasts".

The most surprising finding is that it does not require a recession - two consecutive quarters of economic contraction - to push the federal government into a budgetary deficit.

"In terms of tipping the balance, a nominal GDP growth rate in 2008 under 2.65 per cent (or about 0.65 per cent real GDP in real terms when inflation of about two per cent is taken out) will lead to a deficit for the 2008/09 fiscal year," the report determines.

Finance officials last week downgraded the forecast for real growth in 2008 to just over two per cent, excluding inflation, from its previous projection of 2.4 per cent. Most of that growth will come from energy-rich western Canada.

While the federal government generated a surplus of nearly $14 billion in the 2006-2007 fiscal year - mainly from soaring corporate and personal tax revenues - the federal Finance Department has projected a relatively small surplus of $3.3 billion for the current fiscal year, which ends next March 31.

Prime Minister Stephen Harper and Finance Minister Jim Flaherty have cautioned against expectations of any major new tax cuts or spending programs in future budgets because of the expected slowdown in the Canadian economy. And the federal budget usually contains a cushion of a few billion dollars to offset any unexpected changes to economic growth, so Ottawa may have some flexibility in avoiding a deficit.

However, a lot depends on how deep the slump is in the United States and its impact on Canadian exports of everything from lumber and autos to machinery and petrochemicals. If the troubles get worse in the manufacturing sector in Ontario and Quebec and jobs lost in the industrial sector aren't made up by growth in finance, government, health care, energy and resources, the federal government will face a squeeze on its finances.

Some economists say that even a two per cent annual growth rate for Canada may be optimistic. Global Insight Canada, an economic forecasting company, said the economy could actually shrink further, to 1.4 per cent growth in real terms. And J.P. Morgan chief economist Ted Carmichael predicted Canadian growth would be a negative 0.5 per cent during the first quarter.

"Forecasters have been lowering their estimates for Canadian economic growth in recent months, and historically (they) have tended to be excessively bullish until the economy was actually in recession," notes the report.

Under the mild slowdown scenario proposed by the advocacy group, about one per cent real growth this year, followed by a 1.5 per cent advance next, would result in a balanced budget in the 2008/09 fiscal year, but push Ottawa into a $2.4 billion deficit in 2009-2010.

Under the most gloomy scenario - a two per cent contraction this year and flat growth next - the federal government would post deficits of $6.2 billion in 2008/09, rising to $12.7 billion in 2009/10, assuming no other measures, like spending cuts, are taken.

Such deficits would prove embarrassing to the Conservative government, which is seeking to present itself as better economic stewards than the Jean Chretien-Paul Martin Liberal tandem that ended decades of massive budget deficits in the mid-1990s.

But Lee said the government's fiscal position would still remain strong relative to the past, noting that after 16 years of growth, Canada's debt to GDP ratio has plummeted from 68 per cent a decade ago to a more manageable 32 per cent.

"The conventional wisdom in Ottawa these days is that deficits are to be avoided at all costs, it's almost like they treat surpluses like companies treat profits," he said. "But the fact is we have a lot more room to move in terms of running deficits than we did in the past".

" Lee said if the worst does happen, the Harper government should avoid cutting spending to avoid falling into the red as that would likely harm the economy even further".
Click to expand...
 
I would not be surprised if we go into a deficit situation. Most of the people running the federal government now are the same people who were running the Ontario government five years ago.
 
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